- The Washington Times - Tuesday, April 16, 2002

LONDON (AP) Oil prices rose yesterday as Venezuelan President Hugo Chavez resumed power after an attempted coup crumbled over the weekend.

Volatile markets described by one analyst as "paranoid" saw Mr. Chavez's return as a sign Venezuela would continue its policy of maintaining high oil prices by restricting production.

The reinstated Mr. Chavez made conciliatory moves toward the state oil monopoly, however, raising hopes of an end to strikes and disruptions that have choked off supplies from the world's fourth-largest oil exporter. Venezuela is the No. 3 oil supplier to the United States.

"Is this a chastened Chavez? Does a leopard change his spots? He might be a little subdued, but he is still a populist," said Leo Drollas, chief economist at the Center for Global Energy Studies in London.

May contracts of light sweet crude rose 93 cents, or 4 percent, to $24.40 a barrel and the June contract rose $1.01 to $24.70 in afternoon trading on the New York Mercantile Exchange. On London's International Petroleum Exchange, May Brent rose 46 cents to $24.75 per barrel, while June Brent was up 94 cents to $24.10.

"The market is a bit paranoid because it sees Venezuela as a pivotal country," said Mr. Drollas.

Analysts said the uncertainty made it hard to predict the medium-term trend for oil prices.

"I personally think it's down, but I suspect we are getting to the bottom of the trend," said Ali Tahghighi, an analyst at Barclays Capital.

Iraq's 30-day oil embargo, announced last week, and instability in the Middle East have fueled fears of shortages. Iranian President Mohammed Khatami yesterday reiterated the country's call for Muslim oil producers to halt supplies for a month in protest against Israel's actions in the West Bank.

Iran is the Organization of the Petroleum Exporting Countries' second-largest producer, but other major producers such as Saudi Arabia and Kuwait have said they are opposed to using oil as a diplomatic weapon.

Oil analysts have said there is so much idle production capacity among producers that cutoffs by only a few nations would not have a significant effect on world supplies.

Iran's statement "is just a gesture," Mr. Drollas said.

Venezuela has been a consistent overproducer, favoring volume over price and regularly exceeding its OPEC production quotas, until Mr. Chavez brought it back into line. After Mr. Chavez came to power in 1998, Venezuela became a stalwart OPEC member, adhering to the group's policy of keeping prices up by limiting production.

His policies brought him into conflict with managers at Petroleos de Venezuela SA, the state oil monopoly.

The 1-million-member Venezuelan Workers Confederation and the business association Fedecamaras called a general strike last week to support Petroleos executives protesting Mr. Chavez's appointment of a hand-picked board of directors.

The strife ended in Mr. Chavez's resignation under military pressure on Friday, after a massive opposition demonstration ended in a blood bath, in which 16 persons were reported killed.

The circumstances of the deaths remain uncertain.

On Sunday, the reinstated Mr. Chavez said he had accepted the resignation of the new company president and board. Petroleos said shipments had been resumed and operations were expected to return to normal by today or Wednesday.

Before the disruptions, Venezuela was producing about 2.5 million barrels a day.

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