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Sat, Dec 14, 2002 - Page 12 News List

OPEC, Venezuela make oil surge

PREPARING FOR SHORTAGE The price of the planet's primary source of energy shot up as an oil workers' strike continued in Venezuela and OPEC pledged to cut output

BLOOMBERG , SINGAPORE

An opposition supporter waves a Venezuelan flag during a national strike of oil workers against Venezuelan President Hugo Chavez's government, in Caracas on Wednesday.

PHOTO: REUTERS

Crude oil surged above US$28 a barrel to a seven-week high as OPEC pledged output cuts and an oil workers' strike slashed flows from the group's third-largest producer, Venezuela.

OPEC said it will cut output to 23 million barrels a day as of Jan. 1. That would reduce the total by 1.4 million and may help avoid a price slump as demand slows once winter ends in the US, Europe and North Asia. Prices also rose as Venezuela fired leading dissident workers, threatening to intensify the strike aimed at toppling President Hugo Chavez.

"OPEC is determined to remain in control of the price of oil -- the threat to that now is the political situation in Venezuela," said Simon Games-Thomas, an independent energy consultant in Sydney.

Crude oil for January delivery rose 34 cents, or 1.2 percent, to US$28.35 a barrel at 3:09pm Singapore time in after-hours, electronic trading on the New York Mercantile Exchange. That's the highest since Oct. 24.

Crude oil has risen 43 percent this year partly because of concern about a possible US-led invasion of Iraq, and the strike in Venezuela that slowed or halted crude oil and gasoline exports.

Ali Rodriguez, president of the state oil company Petroleos de Venezuela SA, said he had fired Juan Fernandez, the leader of the company's striking managers, along with three others. Chavez earlier gave Rodriguez unlimited authority to run the company.

"The number of missing barrels is rising with every hour that passes," said Phil Flynn, a senior energy trader at Alaron Trading Corp in Chicago. "This will soon be reflected in problems and tight supplies here in the US." The South American country is the fourth-largest supplier of crude oil to the US and the world's fifth-largest oil exporter.

Venezuela may have to import fuel as a strike entered its 12th day, Agence France-Presse reported, citing state oil company Petroleos de Venezuela SA.

"The perception in the market that the Venezuelan strike would pass fairly quickly is appearing to be an underestimation," Games-Thomas said.

Disruptions may be extended as the opposition continues to demand that President Hugo Chavez step down or call elections, he said.

Meanwhile, OPEC tried to restore the credibility of its production limits that were flouted by nine out of 10 members with quotas in November. OPEC's 11th member, Iraq, doesn't have a quota because its trade is controlled by the UN.

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