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Jan 15 - 21, 2001

Oil heads up as Riyadh cuts crude supplies to Asia

World oil prices continued on an upward track on Thursday with concrete signals OPEC powerhouse Saudi Arabia is preparing to curb supplies to the market in February. Several Asian buyers of Saudi crude said they had been told by Riyadh to expect reductions of between 10 and 12 per cent to oil liftings next month versus January volumes.

It is the first time since August 2000 that Asian customers have failed to receive full nominated volumes and cements expectations that the OPEC producers' cartel will adopt output cuts at next week's ministerial meeting.

U.S. benchmark light crude traded up to an early peak at $29.65 a barrel on news of the Saudi curbs to Asian deliveries. At 0643 GMT, prices had eased back to $29.59 to give an 11 cents gain on Wednesday's $2 rally. The day-earlier surge was triggered by news that Saudi, the world's biggest producer, would cut global deliveries next month by 500,000 barrels per day (bpd).

The reduction would be in line with the leading OPEC producer's one-third share of an overall cartel output cut of 1.5 million bpd.

The Organisation of Petroleum Exporting Countries (OPEC) is expected to agree supply restraints when it meets on January 17 following production increases totalling 3.7 million bpd last year when prices hit 10-year peaks. Prices tumbled about 30 per cent last month largely on worries that supplies will far outstrip demand in the second quarter when peak winter consumption wanes.

The slide set off alarm bells by prompting memories of the 1998 price crash when oil skidded below $10 a barrel because of bloated supplies.

OPEC officials previously have said there was consensus for a cut among the group's 11 members. Saudi favours a reduction of 1.5 million bpd, while price hawks such as Qatar and Kuwait prefer a bigger two million bpd.

Mideast LNG sellers must cut prices to snare market

Middle Eastern gas producers, facing a supply glut, must price aggressively to retain loyal customers and tap into emerging liquefied natural gas (LNG) markets, a senior industry executive said.

And the region's biggest reserve holders, Iran and Qatar, might be inclined towards "more innovative" pricing, Andrew Walker, commercial manager of BG International told an SMI conference on Middle East gas. The two producers between them hold just over 20 per cent of the world's gas reserves.

Qatar has already displayed its competitive streak, with its Ras Laffan LNG Co (Rasgas) winning an LNG supply tender in Taiwan against competition from closer suppliers, Walker said. "Qatar has undercut its benchmark price in order to win the Taiwan tender," he said. And because of its huge reserves, Iran might also be tempted to price aggressively, Walker said. Iran has yet to start exporting LNG, but is discussing two LNG development schemes.

The Middle East has already made significant inroads into traditional LNG markets in Japan, South Korea and Taiwan despite its "location disadvantage" versus rival South-East Asian LNG exporters, Walker said. Of the 35 million tonnes per year of new long-term LNG supplies sold into Asia between 1990-1999, 13.2 million tonnes per year, or 38 per cent, were supplied from the Middle East, he said. The region is supplying 100 per cent of contracted sales for 2000-2005.

There is yet more room for the Middle East, which sits atop a third of the world's gas reserves, to expand. The region is particularly well placed to supply the potentially huge Indian market, Walker said. "For Mideast LNG suppliers, the big LNG prize is undoubtedly India. But any Middle East sellers into India will have to show a willingness to accept a significant increase in market risk compared to the traditional Far East market of Japan."

IDB okays $80 million

The Islamic Development Bank (IDB) has approved new financing deals, including grants, to Islamic states worth $507 million.

An IDB statement, received by Reuters late Monday, said the financing included $65 million for Pakistan to import crude and oil products from IDB member states and another $15 million to import fuel oil from a Saudi Arabian company.

Bangladesh will get $25 million for oil imports and Iran will receive $25 million to import iron from IDB member states and another $15 million to import rubber, the Jeddah-based bank said.

Arafat expected to attend peace talks

Palestinian President Yasser Arafat was expected to meet top-level Israeli negotiators in the Gaza Strip on Thursday to try to pave the way for a revival of peace talks, a senior Israeli official said.

The official said Israeli Prime Minister Ehud Barak would not attend the talks. Taking part will be Nobel peace laureate Shimon Peres, Foreign Minister Shlomo Ben-Ami and senior Palestinian negotiators Ahmed Korei, Yasser Abed Rabbo and Saeb Erekat.

Palestinian officials could not immediately confirm Arafat would attend the late-night meeting but did say Israeli and Palestinian negotiators would hold talks.

"An Israeli delegation will meet a Palestinian delegation headed by Yasser Arafat around midnight (2200 GMT) in Gaza for talks in preparation for renewing the peace negotiations," the Israeli official said.

Lebanon pledges action on banking secrecy law

Lebanon is set to approve a law which will help combat money laundering in the country's highly secretive banking system, monetary authorities said on Tuesday.

Central Bank governor Riad Salameh said a draft law agreed by the cabinet last month would enable the state to lift banking secrecy for the first time on accounts suspected of illegal activities, thus complying with international criteria.

"It is important that Lebanon keeps integrated in the international community. It is important that we abide by international standards," Salameh told a news conference.

The Financial Action Task Force (FATF), an arm of the G7, last June named Lebanon as one of 15 "uncooperative countries" responsible for the recycling of billions of dollars. The list also includes Israel and Russia.

Salameh said the draft law, which is on its way to parliament, targets corruption, drug money and illegal arms trade. It meets the 25 criteria of the FATF and preserves banking secrecy on law-abiding depositors, he added.

Saudi papers launch verbal attack on Clinton

Saudi Arabian newspapers on Tuesday launched a rare attack on US President Bill Clinton and one said Arabs and Muslims would only have bad memories of his eight years in office.

The broadsides came 10 days before Clinton leaves office and coincided with a last-minute push by his administration with new proposals for a peace deal between the Palestinians and Israel.

"Clinton wanted a prize at the end of his term ... Let the proposals leave with those leaving the White House...," said the daily Al-Watan in reference to Clinton's peace initiative.

Saudi Arabia, the world's largest oil exporter, is a strong regional ally of the United States.

But its heir apparent, Crown Prince Abdullah, has surprised observers since the start of a Palestinian uprising against Israeli occupation late in September by his unprecedented criticism of the United States for what Arabs see as its blind support for Israel.

Qatari gift of 'Boeing 747' to Iraq

A US-made Boeing 747 aircraft donated by a member of Qatar's ruling family in a show of solidarity with Iraq has made its debut for Iraqi Airways with a successful internal flight.

Transport Minister Ahmad Murtada and journalists were aboard the jumbo's first flight between Baghdad and the southern city of Basra on Monday, said the national airline of the sanctions-hit country.

The United States imposed sanctions in November against Sheikh Hamad bin Ali bin Jaber Al-Thani, the Qatari royal who presented Iraqi President Saddam Hussein with the 747, to prevent "further diversion of US-origin goods to Iraq".

Saudi says World Court could end Iran-UAE row

A territorial row between Iran and the United Arab Emirates could best be resolved through the International Court of Justice as Tehran has rejected regional mediation, Saudi Arabia's foreign minister said.

"One party, Iran, has declined to allow an opportunity for direct negotiations," Prince Saud al-Faisal said in remarks carried by the Saudi newspaper Al-Watan on Monday.

"The ICJ is the best means to end the dispute if direct negotiations could not be held," he said.

Gulf stocks face uncertain year after dismal 2000

Gulf Arab stock markets face an uncertain year after most of them suffered losses in 2000 ignoring a big rise in the prices of oil, the lifeline of their state-dominated economies, analysts said.

They said continued privatisation and reforms to boost transparency could help lure back local investors, many of whom have switched to regulated, more lucrative Western markets.

"I don't think 2001 is likely to be the year to be in equities, certainly not the beginning of the year, so I don't see this (situation of the Gulf markets) radically changing," said John Bowen, treasurer at banking group HSBC in Dubai.

"This is a time that governments and regulators could use to try and increase transparency, so that when global markets pick up, Gulf markets would be better placed to follow the optimism," Bowen told Reuters.

Egypt-Saudi free trade zone project stumbles

The foreign ministers of Egypt and Saudi Arabia have sent back to a committee of experts their plan for the setting up of a free trade zone, after a joint commission meeting late Tuesday.

"An ad hoc committee will study the project in an attempt to reach an agreement", Saudi Foreign Minister Prince Saud al-Faisal told reporters late Tuesday at the end of a joint commission meeting.

The project is part of a wider plan launched by the Arab League's 22 members in 1998 to set up a free zone and phase out customs barriers by 2007. Fourteen states, including Egypt and Saudi Arabia, have already slashed customs fees on their trade by 30 per cent.

Prince Saud, who co-chaired the meeting with his Egyptian counterpart Amr Mussa, called for the private sector to play a larger role in increasing bilateral trade between the two countries, which he said fell in 1999 to 584 million dollars, down by 133 million dollars compared to 1998.

Arab fund to finance $297 mln Yemen projects

The Arab Fund for Economic and Social Development said on Saturday it planned to finance development projects worth $297 million in Yemen, the official Saba news agency reported.

It quoted Abdul-Latif Al-Hamad, head of the Kuwait-based AFESD, as saying at a meeting with Yemeni President Ali Abdullah Saleh in Sanaa that the funds would be used to build roads, upgrade the capital's airport and implement other projects aimed at preserving the country's cultural heritage.

U.S. Mideast peace mission delayed indefinitely

U.S. President Bill Clinton's last-gasp drive to wrap up a Middle East peace deal within 10 days suffered a further setback with the indefinite delay of a trip to the region by his special envoy Dennis Ross.

"Dennis's trip is postponed for now while the president waits to see if there is progress in reducing the violence in the region," a U.S. State Department official said. A Western diplomat said earlier that Washington wanted to give Israeli-Palestinian security talks more time to make headway before Ross's visit, which had been planned.