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To: Bobby Yellin who wrote (21369)	10/10/1998 12:32:00 PM
From: goldsnow	Read Replies (1) \| Respond to of 116871

Right...Gvn have two tools in their disposable Interest Rtes set....(they would try it ) and Re-inflation....that is IMO is a sure bet... check this out.. Saudi Arabia to study use of oil futures 12:09 p.m. Oct 09, 1998 Eastern By Tony McAuley NEW YORK, Oct 9 (Reuters) - In a move that could ultimately have a significant impact on world oil markets, Saudi Arabia's state oil company, Saudi Aramco, is to study the use of futures and other derivatives as a tool to hedge against falling oil prices. Saudi Arabia, the world's largest oil producer and exporter, has long shunned the use of futures, largely because of worries that its participation in the market would be so influential, akin to the Federal Reserve's position in the money markets. However, futures have come to play a pivotal role in setting world oil prices since they began in the 1970's and other world oil producers, such as Venezuela and Mexico, have started derivatives trading operations to try to manage their price risk. Also, the latest collapse of world oil prices over the past year has led Saudi Arabia and others to consider changing the old order, which was dominated by the cartel quota system of the Organisation of Petroleum Exporting Countries (OPEC). And within Saudi Arabia, there has been a move toward liberalising the economy, including recent talks by heir apparent Crown Prince Abdullah with oil company executives about the possibility of participation in some parts of the Saudi energy sector, such as natural gas and power. The derivatives training course for the Saudi executives is to be run by the New York Mercantile Exchange (NYMEX), the world's largest exchange for oil and other energy futures. It is expected to begin in early November and cover all aspects of futures, options and other derivative securities trading, including accounting and the back office systems needed to support such an operation, according to sources familiar with Aramco's plans. ''It's a big deal,'' said Ed Krapels, director of Energy Security Analysis Inc. in Boston and an energy derivatives expert. ''It's a good sign and in keeping with other moves to liberalise.'' Its impact on Saudi Arabia and on the oil markets depends on whether and how the Saudis follow through on their initial study of the futures market. If they take a very conservative approach and slowly build up a programme designed to smooth the impact of volatile oil prices on the country's revenues, which have been cut 50 percent over the past year, then the impact would be benign, Krapels said. But if they were to view the derivatives markets as a method to try to prop up oil prices, then it could be very disruptive. ''The analogy with the Federal Reserve is a good one because the Fed has influence, but it's limited,'' said Krapels. ''If the market thought the Saudis had a view on where prices ought to be, it would trade against that view. That would be a fool's game and never succeed. ''If I was their advisor, I'd say start small and gradually build up,'' said Krapels, who adds that the whole process of putting together a sophisticated hedging operation could lead Saudi Arabia to break a long tradition and allow some of its physical crude oil to trade freely. The decision is likely to be hotly debated within Saudi Arabia. ''Other countries do it -- Mexico and Venezuela -- but for Saudi Arabia, it's different,'' said a consultant currently working for Saudi Arabia, who didn't want to be named. ''The problem for the market is that Saudi Arabia has better information than anyone else.'' He said that Saudi Arabian officials understand that if their trading in the futures market became a liability, it would undermine the market's integrity and kill futures trading. So, they are likely to be extremely careful in their approach to the market as destroying futures trading would not be in their long-term interest. ((New York Energy Desk, +1 212 859 1623; fax 859 1629; email - nyc.energy.newsroom+reuters.com)) Copyright 1998 Reuters Limited.

To: Bobby Yellin who wrote (21369)	10/10/1998 12:37:00 PM
From: goldsnow	Read Replies (2) \| Respond to of 116871

and this.... Shell Cuts U.S. Staff, Latest Victim Of Low Oil Prices 05:47 p.m Oct 09, 1998 Eastern By Paul Thomasch NEW YORK (Reuters) - Shell Oil Co., the U.S. unit of Royal Dutch/Shell Group, said Friday it will cut 20 percent from its U.S. exploration and production workforce in the next few months, making it the latest company put on the defensive in the face of severely low oil prices. Shell plans to slash 740 jobs from its nationwide exploration and production workforce of 3,700, with offices in New Orleans and Houston expected to be hardest hit by the cuts. The reductions should be completed by year's end, a company spokeswoman said Friday, adding that the cuts will affect a broad range of jobs. Shell said the move is part of a wider ''cost-structure review'' in the face of oil prices that have dropped by more than 25 percent, or $5 a barrel, in the last 12 months. ''In order to achieve the level of cost improvement necessary, it appears that a reduction in our (U.S. exploration and production) workforce level will unfortunately be necessary in order to help us deal with this low price environment for the foreseeable future,'' Shell said in a statement. The move serves as a sharp reminder of the threat that a dramatic and lasting downturn in oil prices can pose even to the major integrated oil companies such as Shell, Exxon Corp. or Texaco Inc. , and to ''oil towns'' like Houston. ''This city and this region have made a concerted and successful effort to diversify,'' said David McCollom, a spokesman for the Greater Houston Partnership, a business group which represents a city that is home to more than a quarter of Shell's exploration and production staff. ''But oil is still a big part of the economy...and it's always a concern when energy prices and the industry have a setback.'' Shell had recently hinted that the cuts could be coming, and said it detailed the specifics of the cuts in a memo sent out to staff earlier in the week. The company said it plans to notify staff on Oct. 21 if they will be included in the reductions, adding it has set Dec. 31 as the departure date for most of those laid off. The announcement Friday comes less than a month after Royal Dutch/Shell said it was vacating four of its national head offices in Europe. The Anglo-Dutch oil company hasn't yet said how many jobs will be lost because of the closures. ''Overall, we expect that the business conditions in the second half of the year will be significantly worse than in the first half,'' the group's chairman, Mark Moody-Stuart, said in a speech when the closures were announced on Sept. 18. Meanwhile, concerns that returns in the oil sector will remain under pressure also have been one of the driving forces behind a recent rush of mergers and acquisitions, which allow companies to reduce overlapping jobs and offices and save on capital costs. The latest of the combinations was unveiled Thursday, when Ultramar Diamond Shamrock Corp. and Phillips Petroleum Co. said they were merging their U.S. refining and marketing businesses. The deal is expected to save the new company, Diamond 66, about $300 million, roughly a third of which will come from slashing 1,000 jobs. Also, British Petroleum Co. Plc and Amoco Corp. plan to initially cut about 6,000 jobs, most of which are expected to come out of the U.S, as part of the companies' agreement last month to merge their operations. Texaco this month will cut about 20 percent of its staff, or 100 jobs, at its headquarters in White Plains, N.Y., while Los Angeles-based Atlantic Richfield Co.'s Chairman and Chief Executive Officer Mike Bowlin cautioned employees in a recent letter that the company would have to go through a cost-cutting program of its own to remain competitive. For Shell's part, the company has said that while no additional layoffs are planned, it has not ruled out other cost-cutting measures, including the sale of some of the exploration and production unit's assets. Copyright 1998 Reuters Limited.