www.helenair.com by The Associated Press

NEW YORK (AP) - Crude oil futures fell sharply Monday, weighed down by growing calls for continued inspections of Iraq's suspected weapons of mass destruction and signs of a breakdown in the strike in Venezuela.

On the New York Mercantile Exchange, nearby March crude oil dropped 99 cents to close at $32.29 a barrel, surrendering most of Friday's gains.

February heating oil shed 1.59 cent to close at 93.43 cents a gallon, while February gasoline was off 2.10 cents at 90.15 cents a gallon.

On London's International Petroleum Exchange, March crude fell 63 cents to close at $29.86 a barrel.

"I think the market is not looking for a Groundhog Day launch date," Tim Evans, an energy analyst at IFR Pegasus, said of a possible attack on Iraq. "I think the background concern is there, but the market is indicating a release of tensions regarding an attack on Iraq."

That release of tensions deepened as Chief U.N. weapons inspector Hans Blix delivered a mixed report to the Security Council that failed to provide an automatic trigger for action against Iraq, as many had speculated.

Blix said that while Iraq wasn't fully complying with disarmament demands, it was providing access to his team of inspectors now working in the country. On the question of how long inspectors need, Blix said he shared "the sense of urgency" to verify disarmament within "a reasonable period of time."

He didn't request more time, but Mohamed ElBaradei, the head of the U.N. nuclear agency, said the weapons search needed an extra few months.

Secretary of State Colin Powell said the inspectors' conclusion wasn't surprising and added that time is running out for Iraq. "We cannot allow the process of inspections to string us out forever," Powell said.

The State Department has reportedly begun drafting a second resolution calling for authorizing force against Iraq, Cable News Network reported.

But Powell said America will decide on the next step once he consults other members of the Security Council and President Bush has conferred with foreign leaders.

Nevertheless, there was a chorus of calls that inspectors should be given more time to complete their work. The calls came from Russia and China as well as traditional U.S. allies France, Germany and Canada.

"There wasn't enough to make the U.S. change its position, and there wasn't enough new information to make France or Russia or China or Germany or the rest of the world change their view of the situation," Evans said.

The oil market had anticipated that a U.S. attack could come as soon as early- to mid-February, said Tom Bentz, an analyst at BNP Paribas Futures in New York. But with growing calls for more inspections, that may be several weeks away, Bentz added. "It doesn't look like anything is going to happen immediately," Bentz said. "It's going to take time."

Meanwhile in Venezuela, there were signs that the general strike is crumbling, allowing oil production to recover from a sharp slump in December and January.

Output has risen to about 1 million barrels a day, according to dissident workers at state-owned Petroleos de Venezuela SA. A PdVSA spokesman said about 90 percent of workers at PdVSA have returned to work.

Before the strike, Venezuela produced about 3 million barrels a day of oil, sending about 2.5 million barrels a day to world markets, including 1.5 million barrels a day to the United States.

"It's going to take a while to get exports back to full capacity, but there are signs that the worst is behind us," said Ed Silliere, an analyst at Energy Merchant in New York.

news.bbc.co.uk Tuesday, 28 January, 2003, 07:00 GMT

Venezuela's general strike has led to a drop in oil production

Oil prices fell in New York on Monday as UN secretary general Kofi Annan asked for more time for UN weapons inspectors to finish their job in Iraq.

In New York, crude oil prices fell 3% after UN chief weapons inspector Hans Blix offered little evidence that Iraq was hiding banned weapons.

March contracts for light sweet crude, the US standard, closed 99 cents lower at $32.29 a barrel, down about $3 from the 26-month high of $35.20 reached last week on fears a war with Iraq was imminent.

But in electronic trade on Tuesday, light sweet crude gained over 1%, up to $33.66 a barrel after a media report that the US was ready to attack Iraq in February.

I think the market is not looking for a Groundhog Day launch date

Tim Evans, energy analyst at IFR Pegasus

In London on Monday, March Brent crude oil fell 63 cents at $29.86.

Groundhog Day

Global stock markets reacted to Mr Blix' speech with sharp downfalls on Monday, but the oil market seemed to be taking a different view on the impact of his findings.

"I think the market is not looking for a Groundhog Day launch date", said Tim Evans, an energy analyst at IFR Pegasus.

"I think the background concern is there, but the market is indicating a release of tensions regarding an attack on Iraq."

Venezuela

Apart from Mr Blix' speech, news that a crippling 57-day-old strike in Venezuela, the world's fifth largest petroleum exporter, could ease also weighed on oil prices.

On Monday, opposition leaders said schools, restaurants and malls may reopen but the strike in the oil industry would go on in spite of efforts to restart production.

The strike has led to a sharp drop in Venezuelan oil production in December and January.

"It's going to take a while to get exports back to full capacity, but there are signs that the worst is behind us", said Ed Silliere, an analyst at Energy Merchant in New York.

Hans Blix

Hans Blix reported to the UN Security Council on Monday after two months of inspections.

He said there were gaps in information that Iraq should have delivered by now, although he could not conclude Baghdad possessed prohibited weapons.

Oil prices are still up almost a third from mid-November on concerns that hostilities in Iraq could upset oil supplies from the Middle East while production in Venezuela is crippled.

An icy Arctic wind sweeping across the eastern United States over the past two weeks has also boosted prices by lifting heating demand.

ogj.pennnet.com Maureen Lorenzetti Washington Editor

WASHINGTON, DC, Jan. 27 -- Congress last week moved closer to completing a long-delayed federal budget for fiscal year 2003, with the US Senate passing a $390 billion appropriations bill Jan 23.

The House and Senate must now reconcile two different spending proposals and settle on a final "omnibus" bill that sets spending levels for most federal agencies through Sept. 30. So far it is unclear what, if anything, would provoke a White House veto.

Included in the bill are annual budgets for key agencies that regulate oil and gas companies, large and small. This includes the budgets for the departments of Interior and Energy, the Environmental Protection Agency, and operating funds for the Federal Energy Regulatory Commission and the Securities and Exchange Commission.

Senators considered more than 200 amendments to the measure, which combines 11 of the 13 annual appropriations bills that fund the federal government. Two military spending bills passed Congress and were signed into law last year.

Senators approved by voice vote a plan by Sen. Jeff Bingaman (D-NM) that gives the president permanent authority to draw down the Strategic Petroleum Reserve in case of an emergency. Congress typically reauthorizes the president's ability to use the SPR every 2 years, but a possible war with Iraq and the current supply woes from Venezuela justified giving the president permanent authority, bill sponsors said. The amendment also directs the Department of Energy to fill the reserve to capacity, even if Congress chooses to expand the stockpile beyond its current 700 million bbl limit. The proposal is expected to win support from the House and the White House.

Senators also approved by voice vote an amendment sponsored by Alaska Sens. Lisa Murkowski (R) and Ted Stevens (R) allowing the Department of the Interior to renew the right-of-way for the Trans-Alaska Pipeline without extensive environmental reviews.

Even with the new Republican majority, the Senate remains opposed to most offshore oil drilling as evidenced by two measures now in the bill. Mike DeWine and George Voinovich, both Republicans from Ohio, sponsored a largely symbolic measure that extends a 2-year ban on drilling in the Great Lakes. Similarly, Sen. Barbara Boxer (D-Calif.) won support for nonbinding language that calls on Interior not to spend staff resources related to the exploration or development of 36 disputed leases off California. The state wants the federal government to buy back the leases.

But that interest in supporting so-called "green" issues extended only so far. Senators narrowly defeated a measure by a 50-46 vote offered by Sen. John Edwards (D-NC). That measure sought to delay an EPA proposal that streamlines a permitting provision of the Clean Air Act called "new source review." NSR is supposed to ensure power generators and refiners do not create more industrial pollution when they expand operations.

Environmental groups, which oppose EPA's plan, said the close vote means there could be pressure on senators to consider the issue again.

Another pending clean air item already in the Senate bill would require EPA to submit a report no later than Feb. 15, 2004 "on the practices and procedures by which states develop separate emission standards, including standards for nonroad engines or vehicles, as compared to the development by EPA of national emission standards under the Clean Air Act."

Opponents of the language say the measure would require EPA to perform legal work that industries could use to attack state pollution control standards. Industry proponents say the study would help EPA be more efficient in its enforcement of clean air rules on a state-by state-basis.

Negotiations ahead Key policy issues regarding environmental enforcement, research, and taxes still await further debate before a final bill is sent to the White House for approval.

Funding in the $390 billion Senate-passed package is subject to a 2.9% across-the-board cut in all domestic programs, a figure likely to be challenged during conference negotiations. Those negotiations could stretch out through next month depending on what the White House is willing to accept.

Meanwhile, the White House unveils a proposed 2004 budget Feb. 3. Bush administration officials said in mid-January that the new budget seeks to increase most domestic spending by 4%, an increase of less than half of what Congress is expected to pass for the 2003 budget. Both White House and congressional officials predict there could be serious cuts in some government programs in order to help pay for increased military spending and a proposed economic stimulus package that includes deep tax cuts ($674 billion over 10 years).

Oil and gas casualties One casualty could be oil and gas research, some industry sources predicted. Even before budget deficits were considered a problem, this White House has historically proposed dramatic cuts in the Department of Energy's fossil fuel office.

This year, with oil prices at relatively high levels, there may not be as much political will in Congress to ignore the White House's wishes on the issue, congressional staff said.

Pending 2003 issues Under consideration in the pending omnibus bill are a myriad of spending items that impact industry directly and indirectly. These include earmarks for federally funded oil and gas research programs, environmental protection enforcement, and money to process leasing applications. Funds to inventory the oil and gas potential of federal land may also be included.

Some producers also would like to see the "Section 29" tax credit renewed. That tax incentive began in 1980 to encourage unconventional oil and gas domestic production. The comprehensive energy bill that failed last year included an extension; it is uncertain whether the tax credit will be included in this bill.

Also typically in the annual federal budget are public policy mandates: Congress this year is again expected to impose a 1-year moratorium on most offshore drilling, for example.

calgary.cbc.ca

Calgary - The international oil markets are approaching what industry analysts are calling the perfect storm.

OPEC countries have been cutting their production, the flow from Venezuela has been interrupted by strikes, cold weather across North America has increased demand and a war with Iraq is nearing, the Canadian Energy Resources Institute heard Monday. Paul Horsnell, head of energy research at JP Morgan in London, expects prices to average $26 a barrel this year, unless there is a war in Iraq and its ability to produce oil is damaged for the long-term.

"You'd have to have a scorched earth policy by Iraq," Horsnell said of the situation it would take to push prices up long-term. "The loss of production capacity, potentially for longer periods, an escalation of the conflict, the Kurdish issue getting out of hand in the north, the Turks involved, the Iranians involved."

Prices were just over $33 a barrel Monday morning, but had dropped 99 cents to $32.29 by market close.

Judith Dwarkin, chief economist at Ross Smith Energy Group in Calgary, is predicting prices will exceed $40 a barrel if war starts.

"The big fear right now is that one little thing more will go wrong, in what's really a tinderbox in terms of pricing situation," Dwarkin said.

She said a big jump in oil prices isn't good for the economy because it results in other products costing more and could help lead to a recession.

Send your comments to webmaster_calgary@cbc.ca  

www.forbes.com Reuters, 01.27.03, 1:50 PM ET

In our LONDON story "Oil falls as U.N. calls for more time in Iraq" para 14 should read ...President George W. Bush's State of the Union address on Tuesday, starting at 2100 EST (0200 GMT Wednesday)... instead of ...starting at 2100 GMT (1600 local)... (correcting time) A corrected version follows

(adds Venezuela para 2, 19-21) By Richard Mably

LONDON, Jan 27 (Reuters) - Oil prices fell on Monday as United Nations Secretary-General Kofi Annan called for more time for weapons inspectors to search Iraq before the United States makes a final decision on going to war.

Signs that the Venezuelan government of President Hugo Chavez is wearing down an eight-week old nationwide strike that has slashed oil exports also helped undermine prices.

U.S. light crude by 1815 GMT was off 83 cents at $32.46 a barrel and London Brent 54 cents lower at $29.95 a barrel.

Chief U.N. weapons inspector Hans Blix delivered his first full report to the U.N. Security Council on Iraq's cooperation with arms inspectors.

He said: "Iraq appears not to have come to genuine acceptance, not even today, of the disarmament that was demanded of it."

Annan said arms experts should be given a "reasonable amount of time."

"If they need time, they should be given the time to do their work," he told reporters at U.N. headquarters in New York.

European and Middle Eastern allies are pushing the United States to allow the inspectors more time, possibly until March 1, officials and former policy makers told Reuters at the World Economic Forum in Davos, Switzerland.

"What's driving the timetable for war is not diplomacy but military readiness," said Roger Diwan of consultancy PFC Energy in Washington.

"If the U.S. needs more time to get the military in place it will use that time to seek diplomatic backing but, whether it gets that or not, we still expect war to start some time between the middle of February and early March."

Blix said that documents Iraq submitted in a 12,000-page declaration had not answered questions on the whereabouts of the deadly VX nerve gas, two tons of nutrients or growth media for biological agents, such as anthrax, and 550 artillery shells filled with mustard gas and 6,500 chemical bombs.

And despite assurances from Iraq that it would encourage its scientists to submit to private interviews, he said no such talks have taken place and Baghdad had blocked the use of U-2 surveillance flights over all parts of Iraq.

At the same time the inspectors had not found evidence of banned activity or production facilities at any of the sites investigated that the United States says exist.

STATE OF THE UNION Attention now will turn to U.S. President George W. Bush's State of the Union address on Tuesday, starting at 2100 EST (0200 GMT Wednesday). Bush is due to meet key ally Britain's Prime Minister Tony Blair on Friday. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

The world's biggest oil exporter Saudi Arabia said at the weekend that it and fellow OPEC members were pumping sufficient volumes to prevent shortages.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel at Davos at the weekend.

"We checked. We called. I checked with individual customers, refineries and others. I ask them one question: Do you feel you need more oil? And the answer is no," he said.

OPEC agreed two weeks ago to raise output by 1.5 million barrels per day to counter some of the shortfall caused by the Venezuela strike.

The Venezuelan opposition on Monday debated scaling back action to ease the burden on a struggling private sector now also threatened by government currency curbs and price controls.

Two months into the grueling stoppage, there was no sign that rebel oil workers -- the backbone of the strike protest -- would end their disruption to crude oil production and shipments from the world's fifth largest petroleum exporter.

But the debate underscored the opposition's struggle to maintain momentum for their strike and left a question mark over the fate of thousands of striking workers at the state oil firm PDVSA, who may be left more isolated in their fight to oust the populist Chavez.

Venezuelan crude output has recovered from the lows of December and strikers said on Monday production was about 966,000 bpd, 29 percent of pre-strike levels. Chavez claims production has reached 1.32 million bpd.