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Friday, 12 April, 2002, 22:52 GMT 23:52 UK
Oil prices fall as Chavez quits
Former Venezuelan president Hugo Chavez
Hugo Chavez resigned following anti-government protests
Oil prices have dropped sharply as the fall of Venezuela's president, Huge Chavez, eased fears over tightened production.

In New York, the price of a benchmark crude plunged by $1.49 to $23.50 a barrel, the lowest price for six weeks.

Traders said the drop reflected a renewed confidence over the stability of short term oil supplies to the US.

The removal of a president who strictly imposed limits set by the oil producers' cartel Opec also undermined expectations over long term crude prices.

Fears ease

Supply fears had been heightened by a Venezuelan oil workers' strike which, with Iraq's one month export ban, raised the prospect of a global crude squeeze.

Output from Venezuela's state oil company, PDVSA - the number three oil supplier to the US - has fallen to 1.4 million barrels a day, the firm said on Friday.

But following Mr Chavez's resignation as president, Venezuelan oil workers vowed to resume full operations by Monday.

"As far as crude and products exports are concerned, we are going to move to normalise all shipments and loadings which are pending," said PDVSA executive Edgar Paredes.

Cash cow

The strike was called in protest at PDVSA board appointments which workers said had been decided on grounds of loyalty to Mr Chavez, not merit.

The action, part of a wide range of anti-Chavez protests, threatened to cripple a Venezuelan economy highly dependent on oil.

The industry provides the government with almost half its revenues.

Popular unrest spilled over into mass protests on Thursday, when 11 people were killed by suspected pro-Chavez gunmen.

'State within a state'

The appointment of an interim government headed by businessman Pedro Carmona has been welcomed at least on Wall Street, where analysts had voiced serious concerns about Mr Chavez's populist and erratic reign.

One of Mr Chavez's first actions on gaining power in 1999 was to sack PDVSA chief Luis Gisanti, who had led Venezuela into conflict with fellow Opec members.

Flagrant quota-busting by Venezuela helped the oil price fall below $10 a barrel, the lowest price for decade.

But Mr Chavez warned that PDVSA had become a "state within a state", as he purged senior executives, and prepared to drain the firm of billions of dollars for use in pet social projects.

'Opportunities'

PDVSA's Edgar Paredes said the firm, South America's largest oil company, would now set its output according to market conditions, rather than Opec demands.

"Let's not talk about quotas. Let's talk about the possibilities Venezuela has in the petroleum business," Mr Paredes said.

In Washington, Roger Diwan, of the Petroleum Finance Company said: "Clearly it hampers Opec. The question is can Opec cut efficiently now?"

But analysts will be keen to hear what Guaicaipuro Lameda, appointed late on Friday as PDVSA president, has in store for the company.

Mr Lameda was sacked from the firm in February over his criticism of the Chavez administration's energy policy.

 WATCH/LISTEN
 ON THIS STORY
Robert Laughin, GNI commodities broker
"More oil will come available to the market
See also:

09 Apr 02 | Americas
Venezuelan general strike extended
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