Oil Prices Backtrack From Record Highs

Associated Press
08.16.2004

SINGAPORE - Crude oil futures backtracked from a record high Monday after initial results suggested Venezuelan President Hugo Chavez had won a referendum on whether he should immediately end his term in office, easing fears of a disruption in supply from the world's fifth-largest exporter.

September crude futures traded at US$46.45 at 1036GMT, down from the new peak of US$46.90 per barrel that had been hit earlier in the day on after-hours access trade at the New York Mercantile Exchange.

The hotly contested poll in the South American state is one of a slew of factors worldwide that have driven prices to a series of record highs in recent weeks.

All of the trouble spots - which include the unrest in Iraq and battle by Russian oil giant Yukos to stave off bankruptcy - have raised fears that supplies could be curbed at a time when global crude demand is robust. Market watchers say there's little spare capacity anywhere to make up for shortfalls.

In Venezuela, Francisco Carrasquero, president of the National Elections Council, said 58 percent of voters voted "no" to the question of whether Chavez should step down, and 42 percent voted "yes." That tally was with 94 percent of the votes counted, Carrasquero said.

"It is absolutely impossible that the victory of the 'no' be reversed," Chavez, standing on a presidential palace balcony in the pre-dawn darkness, told thousands of jubilant supporters. "This has been a great victory for the Venezuelan people."

But the opposition quickly claimed fraud.

Carrasquero stopped short of declaring Chavez the outright winner of Sunday's referendum. But vote counts he released - 4,991,483 against Chavez's recall and 3,576,517 in favor - indicated an insurmountable lead.

The referendum followed a two-year drive to oust Chavez, which included a short-lived 2002 coup, a two-month strike and political riots last March that claimed a dozen lives.

Irrespective of how the situation in Venezuela develops, traders remain wary of continuing unrest in Iraq, where journalists were ordered Monday to leave the holy city of Najaf after talks between the Iraqi interim government and forces loyal to radical Shiite cleric Muqtada al-Sadr broke down.

Two weeks of continuous fighting have put crude pipelines at risk there, traders said, as militants threaten more attacks on the vital infrastructure - which produces around 1.7 million barrels per day, or about 5 percent of the world's daily supply.

Energy markets have also been jittery amid fears of more terror attacks in Saudi Arabia - the world's number-one producer - and simmering civil unrest in Nigeria, which is the lead producer in Africa.

Before the initial referendum result was announced, Ali Rodriguez, the president of Petroleos de Venezuela S.A., the state-run oil company, suggested Chavez would win, and that would bring some stability to prices as oil workers there would be able to "work without the constant pressure of these (political) campaigns."

But Rodriguez also said that in the longer-term upward pressure on crude futures would remain. "This market seems to be drawn like a magnet to that $50 price. I think we're going to make a try," Rodriguez said.

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