Crude Rises to 2-Year High of $33 a Barrel on Shortage Concerns

December 29, 2002

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Singapore, Dec. 30 (Bloomberg) -- Crude oil rose above $33 a barrel for the first time in more than two years on concern the U.S. may attack Iraq early next year and street protests in Venezuela look set to disrupt oil supplies for a fifth week. ``A U.S. attack on Iraq looks likely in late January or early February,'' said Kim Doo Shik, manager of risk management at South Korea's SK Corp, the country's biggest oil refiner. Crude oil may rise to $40 a barrel if the attack begins, he said. In Venezuela, strikers that included 33,000 workers at state oil company Petroleos de Venezuela SA extended an opposition-led walkout to the fifth week, demanding President Hugo Chavez resign or call elections in the fourth-biggest crude oil supplier to the U.S. Crude oil futures in New York have risen 23 percent since the strike started on Dec. 2. ``Iraq and Venezuela remain the two big issues,'' said Simon Games-Thomas, an independent energy consultant in Sydney. ``Chavez has announced that Venezuelan oil production will increase (this week) to over 2 million barrels per day,'' Games- Thomas said. ``His previous assessments of production have, however, been both wildly optimistic and inaccurate, so there is a bit of a problem with credibility over this point.''

Black Blade: Domestic petroleum production in the US has fallen off hard and fast while war threatens, Venezuelan oil production is at a standstill, Caspian Sea oil exploration has been disappointing, North Sea production is in decline, and OPEC production quotas are still somewhat in effect. Some US congressmen are foolishly asking that the Strategic Oil Reserve be tapped so Americans can have short term access to ãcheapä gasoline. Obviously war with Iraq to secure a source of ãcheapä oil is a foregone conclusion. The economy depends on this war.

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