www.gulf-news.com London |Reuters | 25-01-2003

Steamy fuel oil prices in Asia have pried open the arbitrage from Europe and at the same time drawn a provisional ultra large crude carrier (ULCC) booking from the Caribbean to Singapore, traders said.

Traders said exports from the West to Singapore, which had ground to a near halt in January after the Venezuelan strike ate into U.S. supplies, were slowly starting to take shape as players work to lock in paper profits.

"The east-west spread right now for March is around $27-28 and about $25 for February. Some people are starting to lock this in and look for the right freight and buyers in Asia," said one trader.

The east-west spread was trading at a narrow $5-6, just less than a week ago, but ballooned in the last few days following the twin effect of crumbling prices in northwest Europe and soaring prices in Singapore.

Traders said they have yet to see a January spot fixture from Europe or the Mediterranean to Singapore but most expect something to materialise in the coming days.

"The freight rates from the Med to Singapore are talked at around $20 a tonne, so based to the east-west spread, it is possible to move stuff to Asia," said one trader.

Exports from the region, including the Meditterranean, to Asia totalled almost a million tonnes in December but shipments plunged in January due to a combination of expensive freight and high prices in Europe.

Prices in Europe took off in January after icy weather stalled exports from the Baltic, which were exaggerated by strong demand from across the Atlantic as U.S. refiners looked to the region to cover shorts from Venezuela.

"It looks like the U.S. have covered a lot of their shorts and there's no big demand coming up. So people with excess oil are starting to look to Singapore again," said one trader. Shipping sources said that Swiss-based trader Trafigura had put the 350,000-tonner Berge Pioneer on subject for the trip from the Caribbean to Singapore.

They said the tanker, which was chartered at a cost of $4.5 million or $13 a tonne, would begin loading from refineries around the area in late January.

Traders said this was the probably only the second ULCC to make the long voyage from the Americas to Singapore laden with fuel oil.

They said if the shipment does work out, the cargo would arrive in Asia in time to meet an anticipated surge in Chinese demand following the Lunar New Year Holidays in early February.

Prices in Singapore have risen to over a two-year high with cash bids heard on Thursday at a high of $191 a tonne, compared to trades on the benchmark Rotterdam barge at $168 fob.

www.quicken.com Friday, January 24, 2003 10:51 PM ET  Printer-friendly version   A Wall Street Journal Online News Roundup

Americas markets finished lower Friday as war jitters weakened global markets amid reports the U.S. government had warned all citizens leaving overseas to be prepared to leave if necessary.

Although officials said the warning wasn't necessarily related to the Middle East situation, investors suspect the submission of a report on the state of Iraq's weaponry -- to be submitted by United Nations inspectors Monday -- could be a watershed moment in the standoff between Iraq and the U.S.

"Rumors that the U.S. will attack are playing on sentiment," said Fred Ketchen, managing director of stock trading at Scotia Capital Markets. The Dow Jones Industrial Average plunged 2.9% Friday.

In Toronto, the S&P/TSX Composite Index fell 72.53 points, or 1.1%, to 6664.90, with nine of 10 stock groups closing lower.

The information-technology group was the only gainer, up 1.1% on positive earnings surprises from heavyweights Nortel Networks and Open Text. Networking company Nortel ended up 24 Canadian cents to C$3.90 while e-business services provider Open Text rose C$2.68 to C$42.38.

The materials group slid 0.4%, its decline mitigated by the gold sub-index's 2.1% surge. Gold prices rose to six-year highs above $370 an ounce in New York as investors flocked to the safe-haven metal. Barrick Gold ended 64 Canadian cents higher at C$26.00 and Placer Dome rose 17 Canadian cents to C$17.97.

Meanwhile in Mexico City, the key IPC index gave up 41.88 points or 0.7% to 6012.56. Brewer Grupo Modelo's C shares lost 2.5% to 23.78 pesos and financial group BBVA-Bancomer's B shares dropped 1.6% to 8.11 pesos.

In Sao Paulo, the main Bovespa index lost 3.4% to 10783.65. Brazilian oil giant Petrobras, which could be hurt by the cost of importing more expensive crude, fell 4.9% to 45.11 reals.

Among the few shares ending ahead were mining company CVRD, which rose 1.4% to 89.70 reals, and beverage company Ambev, which climbed 0.9% to 478.00 reals. Ambev announced a share buyback early Friday.

Finally, the Merval index in Buenos Aires closed down 10.34 points, or 1.8%, to 557.82 despite the decision by the International Monetary Fund's executive board to approve a debt rollover accord for the South American nation. The pact had already gained preliminary approval.

The IMF approved a deal that will roll over of some $6.8 billion in debt payments the South American nation owes the international lender between January and August. The deal could open the way to similar rollover accords for Argentina with the World Bank and the Inter-American Development Bank.

Energy giant Perez Companc, which accounts for one quarter of the market, fell 4.2% to 2.30 Argentine pesos. The company continues to be negatively affected by the general strike in Venezuela, where the firm produces much of its oil.

24 Jan 03(2:40 PM) |  E-mail Article to a Friend

NEW YORK (Reuters) - World oil prices spiked again on Friday as the United States showed renewed signs of growing impatience with Iraq and said it feared Baghdad was planning to torch its own oilfields in the event of war.

U.S. light crude rose $1.10 a barrel, or 3.4 percent, to $33.35 and London Brent gained 78 cents to $30.50. U.S. crude hit a two-year high of $35.20 earlier this week.

White House spokesman Ari Fleischer called Iraq's refusal to allow scientists to take part in private interviews with U.N. weapons inspectors "unacceptable" and demanded Iraqi leader Saddam Hussein comply "without delay and without debate."

At the Pentagon, the U.S. military said it believed Iraq intended to damage oilfields if war broke out and said it was planning to protect the facilities.

Washington this week shrugged off vocal opposition to the rush to war as China and Russia joined France, Germany and Canada in urging the United States to give inspectors more time in Iraq.

Friday's news was read by traders as underlining Washington's determination to launch military action against Baghdad within weeks if necessary and outweighed evidence that strike-bound Venezuelan production is beginning to recover.

President Hugo Chavez raised the stakes in Venezuela's bitter oil industry conflict on Thursday by announcing 3,000 oil company executives were sacked and saying oil output was rising faster than expected.

TROOPS

Chavez is using troops and replacement crews to break a seven-week-old strike aimed at driving him from office. He still faces huge problems restarting refineries and persuading foreign shippers to resume exports.

Latest shipping data released on Friday showed exports rose to 688,000 barrels a day this week, 25 percent of pre-strike flows and up 60 percent on the week.

Anti-government oil workers concede crude output has risen but say 85 percent of its workforce remain out.

Oil markets are not betting on any swift increase in Venezuelan output.

"For the oil markets, a definitive end of the strike does not translate into an immediate return to pre-strike output levels," said Michael Rothman of Merrill Lynch.

"Reliable indications suggest it may take 30-45 days to get production back to the 1.5 million barrel a day mark with 45-60 days necessary to elevate production by an additional million." Pre-strike output was 3.2 million bpd.

OPEC on Friday made clear that it is already doing all it can to fill the Venezuelan gap with cartel Secretary-General Alvaro Silva saying he saw no shortage on world markets.

"What can we do more? I do not agree there is a lack of oil," he told reporters in Davos on the sidelines of the annual World Economic Forum. "The problem of the price is the threat of war."

Signs are that higher shipments from leading OPEC member Saudi Arabia are flowing in to the United States to blunt the impact of the Venezuelan disruption.

U.S. government figures on Thursday showed crude oil inventories up 1.5 million barrels to 273.8 million during the week to Friday.

The increase defied predictions that inventories would fall below 270 million barrels for the first time since 1975. (richard.mably@reuters.com; reuters messaging: richard.mably.reuters.com@reuters.net; +44 207 542 6280)

Reuters, 01.24.03, 2:13 PM ET

Ratings News  Emerging Markets  Latin America  Corporate Rating News   (The following statement was released by the ratings agency) MOODY'S REPORTS: LATIN AMERICA FUNDS FALTER, HEADLINE LOSING WEEK FOR EQUITY FUNDS NEW YORK, Jan 24 - Latin America funds plummeted 7.67% in the week ended January 23, Moody's Investors Service reports, as the region remains troubled. "The Brazilian central bank's decision to increase interest rates produced a negative reaction," says Moody's funds analyst Keith Murray. "In addition, Mexican telecommunications and construction firms reported losses, and Venezuela's troubles remain on the minds of investors," adds Murray. Latin America funds are off 2.59% year to date. Elsewhere, metals funds continued their long-running rise with a 3.47% advance this week. "Gold is sitting at a six-year high due largely to war fears and the weak U.S. dollar," says Murray. Metals funds are up 4.54% so far this year. Overall, the U.S.-based equity fund market declined by 2.52% in the week ended January 23, as measured by Moody's Composite Total Equity Fund Index. The index tracks the daily returns of 2,648 unique fund portfolios. Domestic Funds Flop Across the Board Despite a solid Thursday, domestic equity funds slumped this week, with value funds leading the losers with a 2.95% decline. Weak earnings outlooks from stalwarts such as Eastman Kodak coupled with economic concerns to swamp U.S. stocks. Growth and income offerings lost 2.77% and growth funds declined by 2.52%, as no investment style was spared. Balanced funds were the week's top domestic performers, aided by their fixed-income allocation, but still incurred a 1.48% loss. Europe Slides, Japan Slightly Optimistic Europe funds declined by 3.67% this week, as fear over a potential war with Iraq weighed heavily on results. British equities slipped to their lowest levels since December 1995, as investors sought safety. In Japan, Mizuho bank, Japan's largest lender, raised a larger than expected amount of capital which sparked positive momentum for Japanese equities early in the week. Japan funds are up 2.84% in 2003. Utilities Remain Powerless Utilities funds declined 3.02% this week, as the energy sector remains under pressure. Utilities funds are down 0.69% since the close of 2002, when the peer group declined 22.65%. Following are yesterday's closing prices and returns data for Moody's Equity Mutual Fund Indices: MOODY'S EQUITY MUTUAL FUND INDICES AS OF JANUARY 23, 2003 DOMESTIC EQUITY MUTUAL FUND INDICES: Index Val .. Total Ret .. YTD Total Ret .. 1 Yr Moody's Value Equity Fund Index 124.49 .. 0.63% .. 0.19% .. -14.90% Moody's Small Capitalization Value Equity Fund Index 149.16 .. 0.79% .. -0.18% .. -11.19% Moody's Small Capitalization Equity Fund Index 137.41 .. 0.82% .. 0.05% .. -18.56% Moody's Growth & Income Equity Fund Index 119.02 .. 1.00% .. 0.67% .. -20.23% Moody's Moderate Growth Equity Fund Index 107.66 .. 1.26% .. 1.12% .. -22.63% Moody's Growth Equity Fund Index 165.45 .. 1.03% .. 0.64% .. -17.98% Moody's Aggressive Growth Equity Fund Index 117.04 .. 1.09% .. 0.76% .. -25.88% Moody's Balanced Fund Index 119.83 .. 0.53% .. 0.39% .. -8.62% Moody's Medium Capitalization Equity Fund Index 127.53 .. 0.82% .. 0.58% .. -15.95% WORLD/FOREIGN/REGIONAL EQUITY MUTUAL FUND INDICES: Index Val .. Total Ret .. YTD Total Ret .. 1 Yr Moody's World Equity Fund Index 92.46 .. 0.63% .. -0.25% .. -18.17% Moody's Europe Equity Fund Index 95.61 .. 0.10% .. -1.76% .. -17.13% Moody's Foreign Equity Fund Index 101.64 .. 0.21% .. -0.42% .. -10.40% Moody's Japan Equity Fund Index 83.36 .. 1.74% .. 2.84% .. -5.88% Moody's Emerging Markets Equity Fund Index 64.70 .. 0.61% .. 1.64% .. -7.37% Moody's Pacific Rim Tiger Equity Fund Index 57.55 .. 0.52% .. 4.09% .. -8.68% Moody's Latin America Equity Fund Index 66.01 .. 0.22% .. -2.59% .. -23.10% Moody's Pacific Basin Equity Fund Index 76.80 .. 1.03% .. 2.38% .. -6.99% Moody's China Equity Fund Index 67.73 .. 0.05% .. 4.27% .. -9.77% SECTOR EQUITY MUTUAL FUND INDICES: Index Val .. Total Ret .. YTD Total Ret .. 1 Yr Moody's Real Estate Equity Fund Index 127.21 .. 0.25% .. -3.45% .. -0.81% Moody's Utilities Equity Fund Index 110.63 .. -0.05% .. -0.69% .. -20.66% Moody's Natural Resources Equity Fund Index 113.62 .. 1.01% .. -1.39% .. 0.06% Moody's Health Equity Fund Index 178.39 .. 0.41% .. 2.38% .. -20.99% Moody's Technology Equity Fund Index 126.26 .. 1.84% .. 3.25% .. -29.52% Moody's Metals Equity Fund Index 98.10 .. 2.44% .. 4.54% .. 60.90% Moody's Communications Equity Fund Index 171.15 .. -0.27% .. 0.43% .. -12.40% Moody's Finance Equity Fund Index 156.97 .. 0.85% .. 1.34% .. -9.21% COMPOSITE EQUITY MUTUAL FUND INDICES: Index Val .. Total Ret .. YTD Total Ret .. 1 Yr Moody's Composite Domestic Equity Fund Index 125.60 .. 0.93% .. 0.54% .. -18.27% Moody's Composite World and Foreign Equity Fund Index 87.23 .. 0.35% .. -0.38% .. -13.60% Moody's Composite Total Equity Fund Index 116.30 .. 0.84% .. 0.49% .. -16.98% Moody's Equity Mutual Fund Indices track the daily average total return performance of 2,648 equity oriented mutual funds that are classified into 26 clusters, or peer groups. Moody's also calculates three composite indices. With total net assets of about $2.2 trillion as of June 30, 2002, the Moody's indices include funds with a three year performance history that meet Moody's inclusion requirements, or about 59% of all assets invested in stock and hybrid investment companies. Funds are objectively classified on the basis of past weekly returns over a period of three years, using statistical factor analysis and cluster analysis. The indices were established with a base value of 100.00 as of March 31, 1997, and daily index values have been calculated since that date. In addition, the indices have been back-casted to March 31, 1995 with weekly total return values calculated on the basis of peer group assignments established as of March 31, 1997. Visit Moody's Managed Funds homepage at www.moodys.com or email us at equityfunds@moodys.com for more information on Moody's Equity Fund Indices and Moody's Fund Analyzer software package.

www.businessweek.com JANUARY 24, 2003 DAVOS, 2003

Even a quick end to an Iraq war might not be enough to pull prices back down to the $23-per-barrel range. That could be disastrous

The prospect of war with Iraq weighs heavily on the minds of many business leaders at the World Economic Forum meeting in Davos, Switzerland. The Europeans, in particular, are worried that an assault on Baghdad will sap already feeble consumer confidence, thus undermining demand, hurting corporate profits, and slowing the sluggish global economy. They also fear that conflict in the Gulf will drive oil prices higher and keep them there for at least the rest of the year.

Most business strategists have drawn up their forecasts for this year assuming that the price of oil would average about $23 a barrel. But it's already up to $30 -- partly because of the general strike in Venezuela, partly because of fears about Iraq. Although oil prices may dip slightly when the Venezuelan situation eases, analysts doubt that they'll fall sustainably below $30 until the Iraq crisis is esolved.

"Some commentators predict the U.S. will win a quick war and that Iraqi oil will then flood onto the world markets driving prices down," says William F. Browder, chief executive of Hermitage Capital Management in Moscow. "But that's wishful thinking. The market could be disrupted for a year or more."

HARDLY GROWING.  That could be disastrous for the world economy. Kenneth Rogoff, economic counseler and director of research at the International Monetary Fund in Washington, D.C., estimates that a sustained increase of $5 a barrel knocks between 0.25% to 0.50% off global growth. Stephen S. Roach, chief economist at Morgan Stanley, warns that "an oil shock" could "easily push the U.S. economy into recession." American output was hardly growing at all by the end of last year, he points out. So higher oil prices is the last thing it needs. Adds Daniel Yergin, chairman of Cambridge Energy Research Associates: "Every U.S. recession since the 1970s has ultimately been caused by rising oil prices."

The Europeans are worried because -- even if the U.S. does win a quick war -- Iraq won't be able to pump more than 1.8 million barrels of oil a day above its current daily output of from 1.7 million to 2.8 million. That's only 2.4% of global output and isn't enough to drive prices down significantly. And that's an optimistic scenario. "Saddam Hussein could destroy a lot of Iraq's oil capacity if he loses a war," points out Browder. So it may be unable to increase production at all after the conflict is over.

Abdallah S. Jum'ah, president and chief executive officer of Saudi Aramco, says Saudi Arabia will do its bit to nudge prices down by pumping more oil. "We want a price in the $23 to $24 range," he says. And OPEC Secretary-General Alvaro Silva-Calderón says the cartel is committed to creating stability in the markets. OPEC countries have been pumping up to 1.5 million more oil a day than usual in recent weeks, he points out, in an attempt to neutralize the impact of Venezuela's problems. "I think the oil price spike is a transitory rather than permanent phenomonen," he says.

GROWING VOLATILITY.  But how much additional oil OPEC, including Saudi Arabia, can produce over the longer term is limited. And Silva-Calderón warns, in a reference to Iraq, that "developments outside our control" could yet disrupt the markets and drive prices higher. "The market is volatile and is getting more volatile," adds Andrei Illarionov, Russian President Vladimir Putin's personal representative to the G-8 gourp of countries. He doubts prices will come down to the mid-$20s level in the short term.

That's good news for Russia, which makes billions of dollars from oil exports. But it's bad news for business, whose costs will rise, and for the world economy, which will end up growing even less than expected.

By David Fairlamb at the World Economic Forum in Davos