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To: 2MAR$ who wrote (49125)	4/14/2002 7:37:34 PM
From: 2MAR$	Respond to of 208838

Oil Prices May Rise In Long Run On Venezuela's Coup ? By Thaddeus Herrick in Dallas and Marc Lifsher in Caracas, Venezuela World oil markets may calm down a bit this week if traders are convinced the Venezuelan oil company is back at work, but in the long term, President Hugo Chavez's return is likely to help set the stage for higher oil and gasoline prices this summer. Right off the bat, traders will be looking for evidence that Petroleos de Venezuela SA, or PDVSA, is again loading ships after a strike last week. Worries about a shortfall from a relatively close supplier to the U.S. contributed to higher oil prices early last week. Down the road, however, Mr. Chavez is seen as a staunch supporter of efforts by the Organization of Petroleum Exporting Countries to keep production restrained and prices up. His stance, along with an export embargo by Iraq and an increase in demand, could contribute to steeper oil and gas prices as the summer driving season nears. Venezuela is the world's fourth-largest exporter of oil and a critical U.S. supplier. Under Mr. Chavez, the country established itself as an important player in the largely successful OPEC strategy of cutting output to drive up prices. Venezuelan exports fell by about 500,000 barrels a day during Mr. Chavez's tenure. "This puts Venezuela front and center in OPEC again," said Larry Goldstein, president of the Petroleum Industry Research Foundation. The question is how much Mr. Chavez will be forced to compromise on oil policy, having been toppled Friday in a civilian-military coup, only to sweep back into power yesterday. Early indications are that the self-styled populist and price hawk is seeking to make peace with at least some of his oil adversaries. Exports of crude oil and products were believed to have returned to normal as of yesterday. Refineries, though not yet fully operational, were said to be working to meet their export commitments. The resumption of exports followed a strike by management and labor at PDVSA (pronounced "pay day vaysa") that led to a 60% decline in production and, ultimately, the coup. But the reinstated Mr. Chavez, sounding a note of moderation, said he accepted the resignation of his choice as president of PDVSA. On Friday, Pedro Carmona, as interim president, reinstated nine top executives who had been fired or forced into retirement by Mr. Chavez after a tussle over the president's alleged politicization of PDVSA. Though oil prices are likely to shoot up, crude prices dropped sharply Friday on the news of Mr. Chavez's ouster, with the U.S. benchmark for May delivery falling $1.52 to close at $23.47 a barrel on the New York Mercantile Exchange. Prior to the work slowdowns and strike, PDVSA had been producing about 2.5 million barrels a day in crude oil and refined products. About 1.7 million barrels a day of crude and products, mostly gasoline, had been going to the U.S. The strike contributed to a backlog of tankers. Venezuela is a significant source of gasoline for the U.S., and several refineries serving the U.S. market are specifically designed to handle its heavy crude. For the U.S. market, it is more difficult to compensate for an oil supply shortfall from Venezuela than one from Iraq. "What's happening in Venezuela is more important for short-term oil markets than what's happening in the Middle East," Mr. Goldstein said. Mr. Chavez has yet to name a new PDVSA president, but he has offered to open a dialogue with company executives, including some of the dissident executives. Still, there is almost certain to be conflict under the leadership of Mr. Chavez, who some predict will return with more power than before. Among the contentious issues under his presidency was a law that raised royalties on new oil production to some of the highest levels world-wide. The law also discouraged foreign investment by requiring the Venezuelan government to hold a majority interest in all joint efforts with foreign companies. While Mr. Carmona suspended that law, in hopes of reversing it, Mr. Chavez has put it back on the books. (END) DOW JONES NEWS 04-14-02