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To: Alastair McIntosh who wrote (5290)	1/12/2003 11:54:16 AM
From: trustmanic	Read Replies (1) \| Respond to of 11633

01/11 Societe Generale Raises Crude Oil Price Forecast (Update4) Paris, Jan. 11 (Bloomberg) -- Crude oil prices will be higher than expected in the first half because of a strike in Venezuela, U.S. military action against Iraq and increased demand from Japan, according to a report by Societe Generale SA. France's third-largest bank raised its forecast for Brent crude oil in the first quarter to $25 a barrel from $22 and in the second quarter to $20 a barrel from $19, it said in a report. Brent closed yesterday in London at $28.73, up 21 percent from two months ago. A monthlong strike in Venezuela, once the fourth-biggest oil supplier to the U.S., has reduced global supply by as much as 2.3 million barrels a day at a time when colder-than-normal winters in Japan and the U.S. boosted demand for heating fuel. ``With excess demand and the absence of production from Venezuela, OPEC itself is concerned about the impact of all these events,'' wrote Frederic Lasserre, head of commodities research at SG Economic Research. ``Prices may shoot up to the same levels as during the Gulf War in the event of military intervention in Iraq.'' Brent rose above $40 a barrel prior to the 1990 Gulf War. Several NATO allies have told the U.S. they remain ready to wage war in Iraq even without further authorization from the United Nations, U.S. Deputy Defense Secretary Paul Wolfowitz said yesterday. Lasserre predicts a war will start in February and last three months. The bank raised its full-year forecast for Brent to $22 a barrel, from $21.75 because of the first-half gain. It said Brent would average $21 a barrel in the third quarter and $22 in the fourth. Vienna Meeting The Organization of Petroleum Exporting Countries meets in Vienna tomorrow to discuss a Saudi Arabia-led increase in oil production in a bid to lower prices from around $30 a barrel after the strike in Venezuela reduced supplies. OPEC probably will add 1 million to 1.5 million barrels a day to its output quota of 23 million to get prices back to its target of $22 to $28 a barrel, analysts said. OPEC officials have said the gain could be as much as 2 million barrels. Crude oil prices in New York had their first weekly decline since mid-November this week because of traders' expectation OPEC will agree to boost supply on Sunday. Prices in New York have risen 16 percent since Dec. 2, when Venezuelan workers went on strike seeking the ouster of President Hugo Chavez. The weekend meeting at OPEC's Vienna headquarters will be the group's second in a month. In December, OPEC raised quotas to 23 million barrels a day from 21.7 million. The group last month pumped 24.78 million barrels of crude oil a day, or about a third of world supply, according to Bloomberg estimates. OPEC members, concerned that rising prices may spur development of competing oilfields, have agreed to consider increasing output when prices stay above their target range of $22- $28 a barrel for 20 consecutive days, based on a benchmark index of seven types of crude oil. The price was $29.51 on Thursday, the 17th trading day above the range. Cold Weather OPEC may also have to consider an increase in demand for oil because of a cold northern-hemisphere winter. A combination of ``unexpected factors,'' including colder than normal temperatures in the U.S. and north Asia, the closure of Japanese nuclear reactors for safety checks boosted demand by 650,000 barrels a day, Societe Generale's Lasserre said. Arctic air over the northern U.S. may bring the coldest two weeks since 1995-1996 over an area from the Atlantic coast to the Rocky Mountains, weather forecaster AccuWeather Inc. said yesterday. In Japan, demand for oil to fire power plants has risen after generators such as Tokyo Electric Power Co. were forced to shut nuclear plants after admitting falsifying safety reports. The company plans to close 15 of its 17 reactors by March and start as many as eight oil-fired power plants to make up part of the lost capacity. Global inventories of crude oil fell by 700,000 barrels a day in the last quarter of 2002, Lasserre said. That's left them equivalent to about 51 days worth of supply, compared with 51.8 days in the fourth quarter of 2000, when Brent averaged $29.92 a barrel ``without a war risk premium,'' he said.