www.chron.com Jan. 28, 2003, 11:00PM Dow Jones News Service

NEW YORK -- Crude oil futures ended higher Tuesday, as traders awaited weekly inventory data and President Bush's State of the Union address.

On the New York Mercantile Exchange, light, sweet crude for March delivery rose 38 cents to close at $32.67 a barrel.

February heating oil slipped 0.39 cent to close at 93.04 cents a gallon. February gasoline jumped 2.57 cents to close at 92.72 cents a gallon.

On London's International Petroleum Exchange, March Brent advanced 38 cents to close at $30.24 a barrel.

Natural gas for February delivery rose 4.8 cents to settle at $5.44 per thousand cubic feet.

Separately, Venezuelan oil output topped the 1 million barrel a day mark, according to dissident workers at state-owned monopoly Petroleos de Venezuela.

www.forbes.com Reuters, 01.28.03, 11:52 PM ET   By Tanya Pang

SINGAPORE, Jan 29 (Reuters) - Oil prices held steady on Wednesday after U.S. President George W. Bush braced his nation for war and called on the U.N. Security Council to meet next week to view evidence of Iraq's alleged illegal arms programmes.

In the annual State of the Union speech, Bush vowed to use the full force of the U.S. military against Iraq if needed and made clear the United States was prepared to act to disarm Iraq with or without U.N. backing.

"We will consult, but let there be no misunderstanding: If Saddam Hussein does not fully disarm, for the safety of our people, and for peace of the world, we will lead a coalition to disarm him," he said.

U.S. light crude rose to an intraday peak at $32.94 a barrel as Bush delivered his speech, but by 0436 GMT was trading at $32.74, seven cents up from Tuesday's settlement in New York.

"The market has completely accepted that there will be war and that's already in the price," said Sarah Emerson, managing director at Boston-based Energy Security Analysis (ESAI).

Bush called for the U.N. Security Council to convene on February 5 to hear Secretary of State Colin Powell present information and intelligence about Iraq's suspected activities with weapons of mass destruction.

"It was interesting that he was so explicit on the February 5 date. The market has a new date to think about, until that time everyone's going to be reading the tea leaves for what Powell's going to present," Emerson said.

The Security Council is due on Wednesday to discuss a report compiled by U.N. weapons inspectors after two months of searches in Iraq.

Chief weapons inspector Hans Blix told the Council on Monday he was unable to corroborate U.S. claims that Baghdad had built an arsenal of illegal weapons, saying he could not give a verdict one way or another. But Blix sharply criticised Iraq for not disclosing all of its arms programmes.

TROOPS SET TIMETABLE Bush is yet to convince some key Security Council allies that Baghdad has broken U.N. resolutions by hiding biological, chemical and nuclear arms.

U.S. and British forces are heading towards the Gulf region and are expected to be ready for combat next month. British Prime Minister Tony Blair, a close ally of Washington, will meet Bush on Friday at the president's Camp David retreat, where they are expected to agree on the strategy and timing of any attack on Baghdad.

ESAI's Emerson said Bush's speech had not changed any time frame for a possible strike on Iraq. "The timetable was set months ago by troop deployments. They will all arrive by the end of February," she said.

The threat of war in the Middle East, which supplies 40 percent of crude oil traded on the world market, and a strike in Venezuela that has paralysed deliveries from the fifth-ranking oil exporter has pushed crude prices up almost 30 percent since late November.

The United States takes about 13 percent of its oil imports from Venezuela and the eight-week opposition-led strike has severely dented supplies into the biggest petroleum consumer.

Traders will get a fresh view on the health of U.S. fuel stockpiles when the government Energy Information Administration releases its weekly report on national inventories.

Analysts expect U.S. crude stocks to fall by two million barrels in the week to January 24 due to the Venezuelan strike, according to a Reuters poll.

Information from ship agents and port authorities indicates Venezuelan exports rose sharply last week from very low levels to about 700,000 barrels per day. Despite the improvement, levels are still only at about 25 percent of pre-strike levels.

news.ft.com By Sheila McNulty Published: January 29 2003 0:31 | Last Updated: January 29 2003 0:31

Analysts expect strong fourth-quarter results from US integrated oil companies this week, in spite of uncertainties for the sector created by troubles in both Iraq and Venezuela.

Matthew Warburton, of UBS Warburg, expects significant improvements on both a sequential and year-on-year basis for the first time since the first quarter of 2001, noting the continuing strength in crude oil and natural gas prices, as well as the recovery in the chemicals business. These positives are to be offset partially by declines in refining and marketing margins.

Nonetheless, UBS forecasts net income for the US integrated oil companies to increase 59 per cent in the fourth quarter, over the period last year, to $6.2bn.

Mr Warburton says the sector could benefit from the crises in Venezuela and Iraq worsening, but he notes the sector is trading at a 23-year high. Combine that with oil prices above $30, the expectation of war in the Middle East and the equity market near its lowest level since 1997, and he sees little to drive "a sector outperformance".

In fact, some of the integrated companies, such as ConocoPhillips, are negatively exposed to Venezuela. Bruce Lanni, senior analyst at AG Edwards, says the strike there should have only a minimal impact on fourth-quarter production volumes and profits for ConocoPhillips, the third-largest US oil and gas company. But if the crisis persists, ConocoPhillips' exposure in the first quarter of 2003 could hit earnings.

The crisis is affecting ConocoPhillips through reduced runs associated with Venezuelan crude at its refineries, he says. The company will be affected in the fourth quarter by downtime related to a power failure at the Humber refinery in the UK.

In addition, Mr Lanni says, a fourth-quarter charge of up to $1.3bn is expected to cover the costs of divesting a large portion of its 2,500 retail sites - part of broader moves to unload non-core assets.

Bruce Schwartz at Standard & Poor's says ConocoPhillips is highly leveraged for its current A- credit rating, citing only $7.5bn to $8bn of normalised operating cashflow and $28bn of debt and debt-like obligations. He says S&P would look favourably on the completion of its plans to divest up to $4bn of non-core assets.

Mr Schwartz considers ChevronTexaco, the second-biggest US integrated group, one of the strongest companies in the oil and gas industry, with an AA credit rating.

Nonetheless, Deutsche Bank says ChevronTexaco also faces production risks related to Venezuela, as restoring oil production and refining after the crisis will be slow. Deutsche Bank predicts that, even if the strike ended now, there would be production shortfalls for those exposed through to at least the end of the first quarter of 2003 and implications for inventories in the second quarter.

That is expected to be offset, however, by upstream profits - forecast to be up more than 200 per cent, due to robust commodity prices and the realisation of synergies stemming from the 2001 merger of Chevron and Texaco, according to Mr Lanni.

Mr Schwartz says, when weighed against estimated annual merger synergies of $2.2bn, ChevronTexaco's missteps with non-core investments and political risk events, such as its Kazakhst an dispute, are unfortunate, but immaterial.

Write-downs associated with ChevronTexaco's investment in Dynegy should be minor, Mr Lanni says, compared with the $1.5bn write-down taken in the third quarter of 2002.

ExxonMobil, the biggest US oil and gas company, maintains an AAA credit rating, and Mr Schwartz says it remains the "pre-eminent company in the oil and gas industry". Its financial profile is outstanding, he says, with little net debt.

Mr Lanni says ExxonMobil's sharply higher upstream earnings are expected to more than offset weaker refining and marketing profits versus levels a year ago. And refining margins are improving.

Deutsche Bank notes that ExxonMobil's much improved downstream and chemicals businesses have only ever operated in a low margin environment and could provide the earnings upside into 20 03.

news.ft.com By Adrienne Roberts Published: January 28 2003 19:45 | Last Updated: January 28 2003 21:47

Crude oil futures edged higher Tuesday after Iraq threatened possible retaliation against oil producer Kuwait in the event of a war.

The market was also waiting for President George W Bush's annual State of the Union address to Congress, in which he was expected to step up the pressure for war.

In London IPE March Brent was 41 cents up at $30.27 a barrel. By the close in New York Nymex WTI was 38 cents up at $32.67 a barrel.

Oil futures traded strongly higher earlier on comments by Iraqi deputy prime minister Tareq Aziz, who said: "Kuwait is a battlefield and American troops are in Kuwait and preparing themselves to attack Iraq. If there will be an attack from Kuwait, I cannot say that we will not retaliate."

There was uncertainty about the status of Venezuela's strike, now in its eighth week. On Tuesday an opposition oil industry report said the country's output had topped 1m barrels a day - a third of normal production - for the first time since the strike began. But there was no sign that rebel oil workers were about to end the strike.

Global coffee supply could fall short of demand in 2003 by 5m 60-kg bags or more, the International Coffee Organisation said in a report.

The 2003/04 Brazilian harvest, expected to be much smaller than the current crop due to drought stress and the biennial off-cycle of trees, was key to this shortfall, it said.

Analysts expected this shortfall to dent the world's large coffee stocks, which the ICO estimated at 32.8m bags at the beginning of the 2002/03 season.

The ICO said the deficit would be the first since the 1997/98 season.

www.cfcnplus.ca POSTED AT 3:17 PM Tuesday, January 28

Don't expect a break at the pumps any time soon. The price of oil is still over the $30 mark.

It has now been over that mark for more than three weeks. On Tuesday, oil closed at $32.67 US per barrel.

One factor driving up the price is the uncertainty over Iraq, but according to international experts there's a more dominant reason.

Dozens of economists, political scientists and oil-industry officials from around the world are meeting in Calgary this week.

Julian Lee is a senior analyst at the London-based Centre for Global Energy Studies. He said there is no doubt uncertainty over Iraq is helping push up the price of oil.

“The world is short of oil and is afraid it's going to become shorter still,” said Lee.

But, he believes the biggest stressor is Venezuela. A general strike there is in it's ninth week. It means more than two-million barrels of oil a day isn't getting to North American markets.

Venezuelan oil is cheaper, easier to refine and takes five to six days to deliver. Middle East oil takes five to six weeks to deliver.

“The Venezuelan disruption is here, and it's real. The Iraqi disruption is potentially in the future,” said Lee.

Whatever drives up the price, we're the ones paying at the pumps.

Mike Lynch, a political scientist at the Center for International Studies, MIT, said OPEC won't allow the price to stay high for long because we'll stop spending.

“They are concerned about that, because in the end they are the ones who lose the sales,” said Lynch.

Even when the Venezuelan and Iraqi situations are resolved, Lynch said spikes in oil prices are something we'll have to get used to.

“The market has changed in certain ways in the last few years, where you no longer have a lot of surplus capacity acting as a buffer against unstable supply or demand,” explained Lynch.

On top of what's readily available to take out of the ground, Lynch said oil companies have also cut back on inventories.

High inventories are costly and when demand increases, having oil on hand keeps the price down. That eats into profits.