Foreign Correspondence

[Amaunet]

Venezuela threat to cut US oil

Chavez is getting some help from China. The more China invests in Latin America the less influence we have. -Am

Venezuela’s left-wing leader, President Hugo Chavez, has made a point of strengthening his oil-rich country’s links with China as part of a policy to diversify its foreign ties beyond its strained relationship with the United States.

China’s ambassador to Venezuela, Ju Yijie, says he expects China to invest up to $500 million over the next few years in Venezuela. Chinese companies are already trying to produce fuel and reactivate a gold mine in Venezuela, among other projects.
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By Nigel Wilson
March 02, 2004
BELEAGUERED Venezuelan President Hugo Chavez has sent a tremor across the international oil market with threats of cutting oil exports to the US.

Predictions the oil price could soar above $US40 a barrel if Venezuelan oil stopped being shipped to the US come as the rapid resurgence in the US economy is forcing a realisation high crude oil prices are here to stay in the medium term, at least.

The left-wing Venezuelan leader made the warning in a fiery speech to supporters in which he accused US President George W. Bush's administration of backing opposition attempts to oust him from the presidency of the world's No.5 oil exporter.

"Mr Bush must know that if he gets the mad idea of trying to blockade Venezuela, or, even worse, of invading Venezuela, if that happened, the people of the United States should know that not a drop of oil would reach them from Venezuela, not a drop more," Mr Chavez told tens of thousands of cheering supporters.

The President said that if the US Government tried to confiscate Venezuelan oil refineries in the US, run by the Citgo affiliate of the state oil firm Petroleos de Venezuela (PDVSA), he could do the same to US oil operations in his country. "There are plenty of American installations here," he said.

Oil-rich Venezuela is locked in a high-stakes political confrontation between people who believe Mr Chavez is taking the country towards communism, and hundreds of thousands of his supporters who say he is lifting them out of grinding poverty.

Mr Chavez accuses Washington of backing a failed coup against him just over a year ago after an oil industry strike sent crude oil prices soaring.

The US takes about 1.65 million barrels of Venezuelan crude oil a day, representing some 40 per cent of the country's production. Although the context Mr Chavez gave was hypothetical, it was the first time the outspoken Venezuelan leader had publicly mentioned the possibility of cutting oil supplies to the US.

Venezuela is among the four top suppliers of crude and oil products to the US market. Crude oil was little changed in New York after rising to a five-week high on Friday amid speculation that industrial demand may rise just as the Organisation of Petroleum Exporting Countries starts to restrain supplies.

The US economy expanded 4.1 per cent in the fourth quarter, higher than an earlier estimate. Gasoline rose to a six-month high on concern that cutbacks by OPEC were coming just as refiners tried to build stockpiles before the start of the US summer driving season in May. "This market has room to go higher," said Dennis Kongsiri, vice-president of Mitsui Energy Risk Management in Sydney.

Freight rates which have dropped by a third in less than three weeks show that "OPEC is making the cuts", he said. Crude oil for April delivery traded at $US36.21 a barrel in after-hours trading on the New York Mercantile Exchange.

OPEC, which pumps a third of the world's oil, is concerned that prices may slump in the second quarter when heating demand falls with the beginning of the northern hemisphere spring.

http://www.theaustralian.news.com.au/common/story_page/0,5744,8837079%255E643,00.html