These two recent headlines should make for some interesting moves in the oil market the next two weeks
dailynews.yahoo.com
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Saturday December 18 12:44 PM ET
Iraq Rejects Inspectors Plan
By WAIEL FALEH Associated Press Writer
BAGHDAD, Iraq (AP) - Iraq rejected today a new U.N. resolution that would return arms inspectors after a hiatus of more than a year, striking a blow to attempts to resume the search for Baghdad's alleged weapons program.
The U.N. Security Council passed the resolution Friday 11-0. But Iraq's allies on the council abstained from the vote, wrecking hopes for a united front to force Iraq to cooperate in return for a possible suspension of U.N. sanctions.
Iraq, which has expressed its opposition to the resolution all along, formally rejected it, with Deputy Prime Minister Tariq Aziz saying it does not meet Iraq's ''legitimate demand for the lifting of the sanctions.''
Iraq is ''ready to face all of the consequences in defense of its sovereignty and legal rights,'' Aziz said, quoted by the state-run Iraqi News Agency.
Aziz derided the U.S. and Britain, chief backers of the resolution, saying their true objective is ''to cheat international public opinion,'' and not to achieve an end to U.N. sanctions imposed in 1990.
State Department spokesman James Foley said Iraq's reaction did not come as a surprise, but the nation does not have the right to refuse to comply with the Security Council resolution.
''The practical consequence of the Iraqi rejection is there will not be any prospect for suspension of sanctions,'' he said. ''This proves once again that Saddam Hussein's regime apparently cares more for its weapons programs than it does for improving the welfare of its people.''
The resolution establishes a new weapons inspection agency for Iraq to resume overseeing the destruction of Iraq's biological and chemical weapons and missiles to deliver them. The International Atomic Energy Agency remains in charge of monitoring Iraq's nuclear weapons program.
If inspectors report full cooperation and progress toward answering outstanding disarmament questions, the resolution offers to consider suspending sanctions imposed on Iraq for its 1990 invasion of Kuwait for renewable 120-day periods.
Russia, China, France and Malaysia abstained from voting on the resolution, agreeing to allow it to pass although they said they couldn't vote in favor of it. In abstaining, the four dashed U.S. and British hopes to send a unified signal to Baghdad that the Security Council would stand for nothing less than full compliance with its demands.
''We were hoping that some of the permanent members, which had maintained balanced positions during the deliberations, would have stopped the resolution by vetoing it. However, we appreciate their abstentions,'' Aziz said.
Russia and China had wanted sanctions suspended soon after Iraq allows inspectors to return. The United States and Britain pressed for Iraqi answers to outstanding questions about its disarmament and a longer waiting period before the sanctions could be suspended.
In the end, the resolution is intentionally vague on the specific amount of cooperation that would trigger the suspension - an ambiguity France cited for its abstention and Aziz noted.
Aziz called the conditions on cooperation ''harsh'' and ''ambiguous,'' saying they were ''inserted to empty any suspension - if it ever took place - of any meaning.''
On Friday, China's U.N. Ambassador Qin Huasun said it was ''highly questionable'' whether the resolution could ever be implemented.
''As I am sure everyone understands, without Iraqi cooperation, implementation of any resolution will hardly be possible,'' he said. ''If Iraq cannot see any hope at the end of the tunnel by implementing the resolutions ... how could it be willing and ready to offer the cooperation we hope for?''
However, Britain's U.N. Ambassador Jeremy Greenstock, who steered the resolution through the council, insisted compliance with the resolution was ''mandatory.''
''It is the law of the globe. Under the U.N. Charter, every member has to implement it. Iraq is a U.N. member,'' he said.
Referring to daily flights by U.S. and British warplanes over Iraq, Aziz said the U.N. resolution was ''void of any indication of the aggression Iraq has been subjected to and of the daily violation of its sovereignty.''
The yearlong crisis with Iraq began when U.N. weapons inspectors departed a day before U.S. and British warplanes launched airstrikes to punish Baghdad for its failure to cooperate fully with their inspections. Iraq then refused to allow them to return unless sanctions were lifted.
The United States reiterated Friday that it isn't easing up on its demands for Iraqi disarmament.
''Today's resolution does not raise the bar on what is required of Iraq in the area of disarmament - but it also does not lower it,'' said U.S. deputy ambassador Peter Burleigh.
The United States would welcome a favorable response from Baghdad, he said. ''We are not seeking an excuse to use force,'' he said.
Regardless of Iraqi cooperation, Secretary-General Kofi Annan is now authorized by the council to appoint an executive chairman of the new inspection agency called the U.N. Monitoring, Verification and Inspection Commission, or UNMOVIC, within 30 days.
The resolution also automatically removes the $5.26 billion limit on the amount of oil Baghdad can sell over six months through the U.N. oil-for-food program to finance the purchase of food, medicine and other humanitarian supplies to help ordinary Iraqis cope with sanctions.
And Annan is authorized to appoint a special envoy to try to clear up two key issues stemming from Iraq's 1990 invasion of Kuwait: the fate of more than 600 missing people and third country nations and the whereabouts of stolen property.
quote.bloomberg.com
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Sun, 19 Dec 1999, 1:27pm EST Arab Gulf Oil Producers May Not Be Prepared for Millennium Bug, UN Says By Sean Evers
Arab Gulf Oil Producers May Not Be Prepared for Millennium Bug
Dhahran, Saudi Arabia, Dec. 19 (Bloomberg) -- Gulf Arab states responsible for half the world's oil reserves may not be adequately prepared for the year 2000 computer problem, the United Nations and U.S. government officials said.
Computer failure and resulting disruption to production and transportation facilities in the six Arab Gulf states -- Saudi Arabia, Kuwait, Oman, Qatar, the United Arab Emirates and Bahrain -- could boost oil prices, which have already more than doubled this year.
Governments and companies in the Middle East won't be ready for the date changeover on Jan. 1, 2000, due to a lack of funding to deal with the ''millennium bug'' computer glitch, the United Nations has said in a report. The bug is a theoretical problem that may cause some computers to malfunction if they misread the two-digit date ''OO'' as 1900 instead of 2000. ''It would have been nice if they had started a year or two earlier, but we're optimistic there won't be any interruption in oil flow,'' said John Koskinen, chairman of the U.S. President's Council on Year 2000 Conversion. ''However, our oil inventories are sufficient to handle any eventuality for a few weeks.''
The U.S. government set up a reserve in 1975 to provide an emergency supply of oil in the event of a crisis, such as the Arab oil embargo of 1973. It currently holds about 573 million barrels of oil -- equal to two months of imports -- according to the Energy Department. The U.S. has tapped the reserve only once, in 1991, during the Persian Gulf War.
Oil companies doing business in the Gulf and local officials in the region said they are concerned about the lack of progress being made by government-run utilities, such as power and water.
Saudi Arabia Confident
However, Saudi Arabia, responsible for about 10 percent of the world's daily oil supply, said it is confident its computer systems will be ready to recognize the year 2000. ''Our worst case scenario would be to lose power for an extended period of time,'' said Saleh al-Zaid, head of the Y2K preparation team at Saudi Aramco, the state-owned oil company that exports more than 6 million barrels of oil per day. ''If that happened we would have enough oil stored at export terminals in the kingdom, Rotterdam and the U.S. to meet all our customers' requirements for about eight to nine days,'' he said.
Most of Saudi Arabia's critical oil installations have their own power plants. These include the Abqaiq facility, which can process 6 million barrels a day, as well as export terminals on the Gulf, gateway for 90 percent of its oil exports.
Mexico Ready, Too
Venezuela and Mexico, two other large exporters to the U.S., also said supplies won't be disrupted by computer breakdowns, and guaranteed all deliveries in the first days of 2000. They agreed to make up shortfalls in world output elsewhere if hobbled by the millennium bug.
Other Gulf producers, however, may not be in good shape.
Kuwait, which holds 9.3 percent of known global reserves, said the various components of its oil industry -- production, refining, shipping -- have different timetables for dealing with the computer bug. ''The production side is the most advanced and is finished testing,'' said Mifhari al-Obaid, an assistant managing director at the state-owned Kuwait Petroleum Corp. ''In an emergency we would be able to run manually if the data systems stop.''
At least one-third of all nations won't have fully tested and fixed their computers by Jan. 1, despite the expenditure of between $300 billion and $600 billion by the world's companies and governments, according to analysts. ''As far as some of the oil companies in the area, a lot of them have just looked at what we call the front-end IT systems, and have not looked at the embedded systems,'' said Ron Nelson, a Dubai-based Y2K computer consultant.
Hidden Threat
Embedded systems consist of computer chips used outside of computers -- in power-distribution equipment, pipeline pump controls and other devices. ''Everyone considered Y2K as a PC-based problem, when in reality it was much larger,'' he said.
U.S. companies are joining in the fight against time in the Persian Gulf. Exxon Mobil Corp. said it is working with its joint venture operations in Saudi Arabia to prepare for the bug. ''We have organized training workshops and set up different in-house committees to tackle this issue,'' said Curtis Brand, chief executive officer of Mobil Saudi Arabia Inc. ''We are ... comfortable with the progress.''
Saudi Aramco and Exxon Mobil are partners in the SAMREF refinery on the kingdom's west coast, which refines about 350,000 barrels a day of crude oil into gasoline, jet fuel and gasoil, a group of fuels that includes heating oil.
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