news.ft.com By Gordon Smith in London Published: January 21 2003 12:18 | Last Updated: January 21 2003 12:18

Crude futures rose sharply in London on Tuesday as concerns over the stability of the Middle East rose after a US citizen was shot dead in Kuwait in a suspected terrorist attack and US and UK troop deployments to the region increased war fears.

The IPE March Brent contract rose 50 cents to $31.21 while the US crude hit a two-year high of $34.50 in electronic trade. On Monday US markets were closed for Martin Luther King day.

Earlier the US confirmed a civilian contractor working on a US military base in Kuwait had been shot dead and another wounded in what it said was a terrorist attack.

The killing came as tension in the Gulf mounted after the British government announced it was committing 30,000 troops to the region. The news came ahead of the interim report from Hans Blix, the UN's chief weapons inspector, to the UN security council next week.

Oil traders remain concerned that any conflict in the Gulf will coincide with the ongoing strike in Venezuela and restrict supplies even further.

The Venezuelan strike, in its 51st day, showed no signs of ending as the battle between supporters of the Chavez government and the strikers intensified.

On Sunday president Hugo Chavez said he was "winning the war on oil" and that oil output had risen to 1.2m barrels per day. But striking workers claimed the actual output was at only half of the president's claimed levels.

The strike has slashed Venezuelan output by about 80 per cent from its pre-strike levels of between 2.5m and 3m barrels per day.

The gold spot price drifted lower ahead of the reopening of trade in the US. The precious metal fixed at $355.20 in morning trade on the London Metal Exchange, down from the previous session's fix of $355.85.

Gold remained close to recent highs however as worries about possible war in the Gulf persisted and the dollar, which traditionally has an inverse relationship with gold, traded just above multi-year lows against other leading currencies.

www.canada.com Tuesday, January 21, 2003 CREDIT: ADRIAN WYLD, CANADIAN PRESS

Oilsands producer Suncor Energy is expected to release strong fourth quarter and year-end profits today as rising oil and natural gas prices fatten the bottom line for the entire oilpatch.

Suncor's results will launch the start of earnings season in the energy sector.

And buoyed by both sky-high oil and strong natural gas prices, profits are expected to nearly double over last year.

The simple answer to the soaring profits expected in the oilpatch lies in commodity prices.

Because of concerns about a war in Iraq and the turmoil in Venezuela, oil hovers at $34 U.S. a barrel, nearly double the $18 a barrel it traded at this time last year.

"That really describes the year in a nutshell," Greg Stringham, vice-president of markets for the Canadian Association of Petroleum Producers, said yesterday.

sg.biz.yahoo.com Tuesday January 21, 7:21 PM

  Singapore Petroleum Co (P.SPC) - Singapore
  Full year ended Dec. 31:
  Figures in Singapore dollars (S$).

                              2002               2001

Revenue S$2,435,488,000 S$2,337,298,000 Pretax Profit 52,532,000 2,441,000 Net Profit 48,934,000 (1,201,000) Earnings Per Share Fully Diluted 11.53 cents (0.28 cents) Existing Capital 11.55 cents (0.28 cents) Dividend 4.8525 cents 1.00 cent (US$1=S$1.7360)

Figures in parentheses are losses. Earnings are unaudited.

Singapore Pete/Earnings -3: Strong Global Oil Prices

SINGAPORE (Dow Jones)--Higher global oil prices helped Singapore Petroleum Co. post a strong profit in 2002, reversing losses from a year earlier.

SPC said it also expects to remain profitable in 2003 due to expectations that oil prices will remain high at least for the first quarter.

For 2002, SPC said its net profit was S$48.9 million - its third-highest since it was publicly listed in 1990 - and a sharp turnaround from the $1.2 million net loss a year earlier.

Revenue also improved due to the higher oil prices, rising to S$2.43 billion last year from S$2.33 billion in 2001.

SPC said its average oil price increased to US$26.56 per barrel from US$25.54 per barrel the previous year.

Sales volume remained steady around 50.5 million barrels.

"The strong performance recorded for 2002 has been due to the group's ability to capitalize on the steep rise in crude and oil prices that characterized the oil market in 2002," the company said in a statement.

But the volatile crude and product prices also created volatility in SPC's refining margins last year, which swung from US$0.50 per barrel to above US$2.00 per barrel throughout the year.

Interest expenses were also lower in 2002, falling to S$7.7 million from S$18.3 million a year earlier.

For 2003, SPC said with the global economic outlook remaining uncertain due to the potential for war with Iraq and due to the crisis in Venezuela, further volatility in oil prices is expected.

"With the existing surplus refining capacity in the region and the low demand growth, refining margins will continue to be under pressure," the company said.

However, the company said, through the implementation of strategies to better manage trading and price risks, "the group expects to remain profitable in 2003."

-By Leigh Murray, Dow Jones Newswires; 65 6415 4158; leigh.murray@dowjones.com

www.bayarea.com Posted on Tue, Jan. 21, 2003 By Daniel Altman NEW YORK TIMES

As Washington decides whether to invade Iraq, uncertainty about a war is already weighing on the economy.

While consumers have not been overly discouraged by higher energy costs or the risk of another terrorist attack, business leaders are clearly hesitant to make new investments until the smoke clears.

Before going ahead with a big new project, asked Robert J. Barbera, chief economist of ITG/Hoenig, an investment firm, "Wouldn't you wait a quarter?"

In the calculations of many analysts, he said, an invasion of Iraq is "90 percent likely to occur, and 80 percent likely to occur in the next 90 days." Those probabilities may have risen with the discovery of empty chemical warheads in Iraq on Thursday, which led some investors to dump stocks in favor of government bonds, and dollars in favor of euros.

The budgetary costs of any war and future reconstruction are unknown. Even if war with Iraq never comes, though, the economy will still have received some stimulus from the upswing in military and domestic security spending since the Sept. 11, 2001, attacks. But that has not been enough to overcome the drag on investment, which began to sag as long ago as late 2000, after the technology bubble burst.

Adding to the uncertainty discouraging big companies from new investment, Barbera said, are the huge differences between the best- and worst-case outlooks for war. An invasion could be quick, surgical and successful, clearing the way for a surge of investment on delayed projects. Or it could be long, messy and fraught with retaliations by terrorists.

"Geopolitical risks, such as the threat of war with Iraq, tensions over North Korea and terrorism, have added to the list of business concerns," said Anthony M. Santomero, president of the Federal Reserve Bank of Philadelphia, in a speech last Tuesday. "These factors continue to leave businesses reluctant to invest."

Moreover, businesses can afford to take a wait-and-see attitude right now, Barbera said, because the economy is not exactly bursting with profitable opportunities. "You're not feeling like you're giving up something in growth by postponing investment," he said.

A more tangible drag on business activity is the relatively high price of oil, another consequence of uncertainty about the prospect of war. Oil prices are already up, with crude running above $30 a barrel. Unrest in Venezuela, a leading supplier to the United States, has not helped. Higher prices for oil and its commercial byproducts are already pressuring industries from pharmaceuticals to trucking.

"I don't think there's going to be much more than what we're already paying in the market price," said Samuel K. Skinner, chief executive of USFreightways. "We're already feeling it with the threat of war."

USFreightways can pass some of its extra costs along to customers through fuel surcharges, Skinner said, but the company may have to protect itself further by hedging against potential increases in the price of oil. "We're not hedging right now, though hedging is something we traditionally would look at," he said. "In retrospect, maybe we wish we had."

Many analysts and executives alike said they expect the price of crude oil to stay high until the United States and its allies have a war well in hand.

"It is unlikely we would face major shortages of physical product as a result of any war," said Steve Turner, an oil analyst at Commerzbank in London, but "a short-term price spike in the coming three months is possible."

OPEC, the international oil cartel, has increased its production by about 1.5 million barrels a day to counter Venezuela's stalled exports. Yet the group is unlikely to try to stave off a war-induced jump in the price of oil, Turner said.

The removal of Saddam Hussein, on the other hand, offers a balancing factor -- greater access by the world market to Iraq's vast oil reserves, which could bring down the price. The range of possible outcomes for oil prices has rarely been wider, except perhaps during the last conflict in the Persian Gulf.

When Iraq occupied Kuwait in 1990, cutting off shipments from that country, oil prices shot up to $35 a barrel from $17 four months earlier. As the United States massed troops in Saudi Arabia, the price began to fall.

Almost as soon as the invasion of Iraq began, the price slipped to $20 as it became clear the United States and its allies would win a quick victory. Talk of street-to-street fighting has led to worries that this conflict could take longer, though.

"The first thing we would worry about is the valuation of raw materials," said Ray Anderson, director of investor relations at DuPont, which uses tons of materials derived from crude oil in its manufacturing of plastics and chemicals. Buying financial hedges against high prices for oil byproducts is not easy. "They're just not very deep, liquid markets," he said. "We are largely, almost essentially unhedged in buying key oil-derived materials."

Some big users of oil-derived fuels have hedges built into their businesses. Bill Zollars, chief executive of the Yellow Corp., said that virtually all of his trucking business was insulated from rising fuel costs by surcharges, which scale up trucking fees automatically when the price rises above certain thresholds. But he said he worries that his business might suffer indirectly if economic activity slows more broadly. And hedging itself adds to the cost of doing business.

By waging war in Iraq, the Bush administration could be taking a gamble with consumers' confidence in the economy. Ken Goldstein, an economist at the Conference Board, said that depending on its outcome, the war could either embolden consumers or, in the worst case, send them reeling.

"If the military action itself goes without a hitch," he said, "there would be a boost in terms of overall confidence. But countering that is the idea that we are no more going to bring Saddam out of Iraq than we brought bin Laden out of Afghanistan."

And Goldstein, like some others analysts, said he worries that any successful retaliation by terrorists in the United States could cause consumers to pull back.

"The potential to drop confidence like a stone is probably not from the bombing or fighting on the ground in Iraq, but more from the unintended consequences," Goldstein said. That concern was not present in the 1991 Gulf War, in which existing concerns about the domestic economy -- not the side effects of the war -- came to dominate consumers' moods.

asia.reuters.com Tue January 21, 2003 06:25 AM ET By Huw Jones

LONDON (Reuters) - Wall Street eyed a firmer opening on Tuesday as U.S. investors return from Monday's holiday to face a week laden with heavyweight earnings against the backdrop of a military build-up in the Middle East.

Among the day's corporate news, the Wall Street Journal reported that EchoStar Communications Corp. DISH.O is in talks to sell itself to Rupert Murdoch or Liberty Media Corp. L.N .

EchoStar shares in Frankfurt rose 2.8 percent to $26.21 in thin trade from Friday's New York close at $25.77.

By 5:48 a.m. EST, U.S. stock index futures were up 0.2 percent to 0.6 percent as markets reopen after Monday's Martin Luther King holiday.

Scorecards from financial giant Citigroup C.N and pharmaceutical firm Johnson & Johnson JNJ.N are due before the bell.

Ford F.N , which also reports before the opening, said on Tuesday it plans to produce its Mondeo cars in China, the world's fastest growing auto market, in the second half of this year. Also in autos, traders said UBS Warburg raised its rating on General Motors GM.N to "buy" from "neutral."

"The market is getting more nervous as we get close to doing something in Iraq," said Steve Previs, a dealer in U.S. shares at Jefferies International in London.

Drug group Pfizer Inc. PFE.N said on Tuesday it would sell its Schick-Wilkinson Sword unit, the world's second biggest shaving brand, for $930 million in cash to U.S. battery maker Energizer Holdings Inc. ENR.N .

Motorola MOT.N , the world's number two mobile phone maker, reports after the close. The group said earlier this month it was poised for a turnaround in 2003 after battling an industry meltdown over the past two years.

Topping the day's economic numbers, U.S. housing starts, due at 1330 GMT, are expected to show a decline in December to 1.682 million units from 1.697 million in November.

On Monday, Schroder Salomon Smith Barney raised its sector weighting on semiconductor equipment makers to "overweight" from "marketweight," favoring Applied Materials AMAT.O , Axcelis ACLS.O , and Lam Research LRCX.O .

MORE TYCO TROUBLE?

The Wall Street Journal reported that troubled conglomerate Tyco International TYC.N had delayed paying many bonuses that were due last quarter in order to boost cash flow.

Meanwhile, the U.S. Securities and Exchange Commission said late on Friday it has stepped up its separate probes of Electronic Data Systems EDS.N and advertising agency Interpublic Group IPG.N to formal investigations.

Shares in U.S. storage networking form Brocade BRCD.O traded in Frankfurt rose 6.5 percent to $5.37 from Friday's close in New York at $5.13.

On Monday, Hewlett-Packard HPQ.N , the world's biggest personal computer maker, and Brocade announced a partnership to develop smarter networks.

The possibility of a war in Iraq continues to trouble investors.

The United States urged the U.N. Security Council to live up to its responsibilities on Iraq and not shirk difficult choices as a military buildup in the Gulf fueled speculation that war is looming.

Although the dollar, recently pressured by war fears, rebounded from a three-year low against the euro, dealers said it was more of a technical correction after the market had pushed the greenback down so far.

U.S. oil prices hit fresh two-year highs of above $34 a barrel amid the military build-up in the Middle East, and a seven-week old strike in oil producer Venezuela.

($1=.9394 Euro)