cbs.marketwatch.com FUTURES MOVERS By Myra P. Saefong, CBS.MarketWatch.com Last Update: 11:00 AM ET Jan. 29, 2003

NEW YORK (CBS.MW) -- Crude futures moved back toward $33 a barrel Wednesday as President George Bush's rationale for war against Iraq revitalized investor concerns over a disruption of oil supplies out of the Middle East.

Prices were higher despite only minor changes to U.S. crude supplies last week. The market was looking for a sizable decrease on the back of Venezuela's ongoing oil strike.

On the New York Mercantile Exchange, the March crude futures contract traded at $32.92 a barrel, up 25 cents.

Meanwhile, February gold traded near $370 an ounce. See Metals Stocks.

"If there were any doubters before last night, the situation become crystal clear," said Mike Cavanaugh, an analyst at Peak Trading Group in Chicago. Bush's State of the Union Address Tuesday evening "made it clear to the world that our intentions are to disarm Iraq." See speech highlights on CBS News.

Inventory data weren't quite as convincing. The Energy Department and American Petroleum Institute reported on minor changes to crude inventories during the week ended Jan. 24.

Inventories fell by 500,000-barrels, the Energy Department said, but the API posted a 232,000 barrel rise. Total crude inventories stand at 273 million barrels, according to both groups.

The results defied analysts' expectations for a sizable drawdown. Analysts at Fimat USA expected a decline of 4 million barrels in crude inventories.

Crude inventories are about 45 million barrels below their year-ago level and just above the minimum operational inventory level of 270 million barrels.

Crude imports were close to their level of last week, and it appears that some crude oil from Venezuela is still arriving in the U.S., according to Economy.com energy economist Thorsten Fischer.

Distillate inventories declined by 6.8 million to 122.4 million barrels in the latest week, the Energy Department reported. The API said supplies fell by 7.5 million to 123.1 million barrels.

Fimat was looking for a fall of 5 million barrels for distillates and a rise of 1 million barrels for gasoline.

"The tight crude inventories are cause for some concern, because they have an adverse effect on the production of refined products," said Fischer.

Following the news, petroleum-product prices traded higher. February unleaded gasoline rose by 1.88 cents to 94.6 cents a gallon. February heating oil traded at 95.1 cents a gallon, up 2.06 cents.

More support for oil

With Bush's strong case for war on Iraq and Secretary of State Colin Powell due to provide further incriminating evidence against Iraqi President Saddam Hussein to the UN Security Council on Feb. 5, "it is increasingly likely that an attack will be launched by mid-February," Fischer said.

And the strike in Venezuela will continue to be a supportive factor for oil, Fischer said.

While there is confirmation from both Venezuelan President Hugo Chavez and striking oil workers that production has surpassed 1 million barrels per day, about one third of normal production, "the pick-up in production is due to the fact that production has been focused on newer oilfields where crude oil is easier to extract," he said.

He pointed out that "additional increases in production that require extraction of crude from older fields will be much harder to come by" and "it will take a resolution of the general strike and considerable time and investment to restore crude oil production in Venezuela to pre-strike levels."

In other energy news Wednesday, natural gas for February was up 4.6 cents at $5.49 per million British thermal units. The March contract, which will become the lead-month at the session's close, was up 7.1 cents at $5.43 per million British thermal units.

Over in the equities arena, most oil service stocks traded lower. The Oil Service Index ($OSX: news, chart, profile) was down 0.3 percent.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, traded at 245.9, up 0.5 percent amid strength in crude futures. Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

www.forbes.com Reuters, 01.29.03, 4:16 AM ET By Tanya Pang

SINGAPORE, Jan 29 (Reuters) - With war looming in the oil-rich Middle East, governments across Asia are stepping up emergency measures to protect energy-hungry economies from a possible crude price spike which would sap the region's fast growth.

With benchmark crude prices hovering close to 26-month peaks over $35 a barrel, import-dependent Asia, which has little by way of emergency stocks, is gearing up to safeguard supplies by stockpiling or enforcing measures to limit consumption.

South Korea, China, the Philippines and Thailand announced concrete emergency measures this week, while India, Bangladesh have been steadily extending inventories (see table below).

"We are ready to face any difficulty if there is an interuption in supplies. We are keeping our tanks full," Indian Oil Minister Ram Naik told Reuters on Wednesday.

Unexpected events such as the eight-week opposition strike in Venezuela, which has strangled sales from the world's fifth biggest exporter, and the possibility of war disrupting crude flows from the Middle East have reinforced Asia's vulnerabilty.

"For the last two to three months three factors have been supporting the market: the Venezuelan strike, Iraq and Asian buying," said Sarah Emerson, managing director at Energy Security Analysis (ESAI) in Boston.

"Asian governments and refiners tend to build inventory in a crisis, whereas Western countries don't have that kind of speculative buying pre-crisis, they have stocks," she said.

About 60 percent of Asia's daily crude requirement of 21 million barrels is shipped in from other continents, with roughly 10 million barrels a day coming from Middle East producers.

Only Japan and South Korea, which import virtually all their energy needs, have built appreciable state emergency reserves exceeding the minimum standard of 90 days of consumption set by the West's energy watchdog, the International Energy Agency.

Without that buffer, regional economies would be hard hit by soaring energy bills.

Since the 1997 financial crisis, Asia has been trying to boost domestic consumption as a cushion against external economic shocks. An oil price surge may hit consumer spending and corporate investment making Asia more reliant on exports.

The 10 ASEAN nations agreed at an unprecedented meeting with China, Japan and South Korea in Osaka, Japan, in September that concerted action was needed to step up energy security through cooperation and coordination of emergency policy.

ASEAN comprises Thailand, the Philippines, Brunei, Malaysia, Cambodia, Indonesia, Vietnam, Laos, Singapore and Myanmar.

Analysts say the huge cost of building and maintaining inventory gives emerging economies little incentive to stockpile fuel.

"China is most likely to build strategic stocks as it still has fast growing demand growth. It is enormously dependent on Middle East crude and it can foot the bill," said ESAI's Emerson.

"India may be able to one day, but only if the oil companies bear the brunt of the cost. Frankly, Southeast Asian nations will talk about regional reserves but they just cannot afford it."

Following are measures announced in January by Asian governments:

• China said on January 29 it would start to build this year a reserve of 150 million barrels of crude.

• The Philippines said on January 29 refiners must hold a minimum 30-day inventory of crude and oil products by February 3. Bulk oil suppliers must hold a minimum 15-day inventory and all players were required to have a minimum seven days of supply of liquefied petroleum gas.

• South Korea said on January 28 it may partially release oil stocks if Middle East benchmark Dubai crude hits $33 a barrel. It said it would cut import tariffs and local taxes on oil products and limit some business energy use if Dubai crude went into the range $29-$33. If Dubai topped $35, it said it would release more reserve oil, deepen tax cuts, set a ceiling price for local oil products and use funds set aside to subsidise refiners' oil imports and cut oil products exports.

• Thailand said on January 28 it had drawn up a contingency plan in the event of war including a stop to oil products exports and special crude imports from Malaysia, Indonesia and Brunei. Bangkok has kept strategic oil stocks of 50 days of consumption since the September 11, 2001, attacks on the United States.

• India said on January 7 that state refiners had raised oil products inventories to meet demand for 35-40 days and had enough crude to keep refineries running for one month.

• Bangladesh said on January 7 it had 340,000 tonnes of oil products and 175,000 tonnes of crude in stock to meet demand for 20-25 days. It also said it was seeking emergency oil imports from Malaysia, Thailand and Brunei.

Reuters, 01.29.03, 4:16 AM ET By Tanya Pang

SINGAPORE, Jan 29 (Reuters) - With war looming in the oil-rich Middle East, governments across Asia are stepping up emergency measures to protect energy-hungry economies from a possible crude price spike which would sap the region's fast growth.

With benchmark crude prices hovering close to 26-month peaks over $35 a barrel, import-dependent Asia, which has little by way of emergency stocks, is gearing up to safeguard supplies by stockpiling or enforcing measures to limit consumption.

South Korea, China, the Philippines and Thailand announced concrete emergency measures this week, while India, Bangladesh have been steadily extending inventories (see table below).

"We are ready to face any difficulty if there is an interuption in supplies. We are keeping our tanks full," Indian Oil Minister Ram Naik told Reuters on Wednesday.

Unexpected events such as the eight-week opposition strike in Venezuela, which has strangled sales from the world's fifth biggest exporter, and the possibility of war disrupting crude flows from the Middle East have reinforced Asia's vulnerabilty.

"For the last two to three months three factors have been supporting the market: the Venezuelan strike, Iraq and Asian buying," said Sarah Emerson, managing director at Energy Security Analysis (ESAI) in Boston.

"Asian governments and refiners tend to build inventory in a crisis, whereas Western countries don't have that kind of speculative buying pre-crisis, they have stocks," she said.

About 60 percent of Asia's daily crude requirement of 21 million barrels is shipped in from other continents, with roughly 10 million barrels a day coming from Middle East producers.

Only Japan and South Korea, which import virtually all their energy needs, have built appreciable state emergency reserves exceeding the minimum standard of 90 days of consumption set by the West's energy watchdog, the International Energy Agency.

Without that buffer, regional economies would be hard hit by soaring energy bills.

Since the 1997 financial crisis, Asia has been trying to boost domestic consumption as a cushion against external economic shocks. An oil price surge may hit consumer spending and corporate investment making Asia more reliant on exports.

The 10 ASEAN nations agreed at an unprecedented meeting with China, Japan and South Korea in Osaka, Japan, in September that concerted action was needed to step up energy security through cooperation and coordination of emergency policy.

ASEAN comprises Thailand, the Philippines, Brunei, Malaysia, Cambodia, Indonesia, Vietnam, Laos, Singapore and Myanmar.

Analysts say the huge cost of building and maintaining inventory gives emerging economies little incentive to stockpile fuel.

"China is most likely to build strategic stocks as it still has fast growing demand growth. It is enormously dependent on Middle East crude and it can foot the bill," said ESAI's Emerson.

"India may be able to one day, but only if the oil companies bear the brunt of the cost. Frankly, Southeast Asian nations will talk about regional reserves but they just cannot afford it."

Following are measures announced in January by Asian governments:

• China said on January 29 it would start to build this year a reserve of 150 million barrels of crude.

• The Philippines said on January 29 refiners must hold a minimum 30-day inventory of crude and oil products by February 3. Bulk oil suppliers must hold a minimum 15-day inventory and all players were required to have a minimum seven days of supply of liquefied petroleum gas.

• South Korea said on January 28 it may partially release oil stocks if Middle East benchmark Dubai crude hits $33 a barrel. It said it would cut import tariffs and local taxes on oil products and limit some business energy use if Dubai crude went into the range $29-$33. If Dubai topped $35, it said it would release more reserve oil, deepen tax cuts, set a ceiling price for local oil products and use funds set aside to subsidise refiners' oil imports and cut oil products exports.

• Thailand said on January 28 it had drawn up a contingency plan in the event of war including a stop to oil products exports and special crude imports from Malaysia, Indonesia and Brunei. Bangkok has kept strategic oil stocks of 50 days of consumption since the September 11, 2001, attacks on the United States.

• India said on January 7 that state refiners had raised oil products inventories to meet demand for 35-40 days and had enough crude to keep refineries running for one month.

• Bangladesh said on January 7 it had 340,000 tonnes of oil products and 175,000 tonnes of crude in stock to meet demand for 20-25 days. It also said it was seeking emergency oil imports from Malaysia, Thailand and Brunei.

www.thisdayonline.com Dateline: undefined/Wed Jan 29 12:46:54 2003/undefined From George Oji in Abuja

Presidential Adviser on Petroleum and Energy, Dr. Rilwanu Lukman has said that given the tremendous influence of the Organisation of Petroleum Exporting Countries (OPEC) on the world oil market, sustaining Nigeria's membership of the organisation will better serve the interest of the country than pulling out of the body.

Lukman also argued that being a country whose over 90 per cent earnings come from oil and gas, and which is easily affected by the dwindling oil prices, Nigeria is better protected under OPEC than outside of it.

Lukman expressed this view yesterday in a lecture he delivered at the Voice of Nigeria (VON) quarterly personality programme, "Global Guest on VON."

"Our projections have shown that as time goes on, the world will become more dependent on OPEC oil. This makes our role as OPEC member very important", Lukman said.

Lukman made this clarification against the backdrop of calls for Nigeria to pull out of the 11-member oil cartel. OPEC, Lukman noted, controls about 75 per cent of total world crude oil reserve and 60 per cent of world traded oil.

With this strength, the presidential adviser stated that Nigeria's role as a member country of OPEC becomes very important. He said that Nigeria has through its activities in OPEC as the fifth largest producer of oil, been able to stabilize the price of oil the world over.

On the current high price of crude oil, Lukman called for caution, saying that history has shown that when prices of oil rise astronomically as is the case now, it also often assumes similar plunge down, with accompanying devastating effects.

Describing the current high price of oil as unreal, Lukman urged all OPEC countries to be prepared for any eventual change. He said that the current high price of oil which hovers around $32 per barrel, is the combined result of Venezuela's oil workers' strike and the threat of war in the gulf region.

"We may be making high revenue now, we may suffer low level of revenue later. We have to be careful to assume that the present high crude oil price may last long", he said.

He cautioned against the danger of making over bloated national projections based on such high prices, and said that the country should always be prepared for any sudden change.

While admitting that high oil prices bring more revenue into the national coffers, Lukman said that the same situation often have negative effects because it results in the encouragement of alternative sources to oil, thus bringing down the relevance of oil. In his own projection, a price of say $25 per barrel is good for the development of the energy sector.

www.channelnewsasia.com First created : 29 January 2003 1410 hrs (SST) 0610 hrs (GMT) Last modified : 29 January 2003 1410 hrs (SST) 0610 hrs (GMT)

South Korea, the world's fourth-biggest oil importer, has announced a package of measures to cushion its economy from rising oil prices.

They include cuts in oil import tariffs and local taxes, as well as limiting energy use of businesses like department stores.Advertisement

Official data show that a US$1 rise in crude oil prices costs South Korea US$750m in lost trade surplus annually, while cutting economic growth by 0.1 percentage point.

South Korea, Asia's fourth-largest economy, is vulnerable to global oil price moves as it imports all of its crude needs, more than 70 percent of which is sourced through the Middle East.

Benchmark US crude has soared over US$35 this month versus an average of US$26 in November.

Oil has risen some 30 percent since mid-November on concerns war in Iraq could upset supply from the Middle East while a prolonged strike in Venezuela has curtailed oil production and exports.