Oil closes below US$60 a barrel for the first time this year
New York, USA: Crude oil futures closed below US$60 a barrel for the first time this year Tuesday, with traders betting that on a warm winter keeping supplies plentiful.

March oil contracts dropped as low as US$59.52 in afternoon New York trading, before closing at US$59.57, down US$1.67 from Monday's close.

Futures contracts with next-month expiry dates haven't settled below US$60 since Dec. 28. Crude futures have now fallen 13 per cent in the last two weeks.

Analysts said Wednesday's U.S. petroleum inventory report is likely to show higher supplies of crude oil and gasoline. That was outweighing geopolitical worries over Iran's nuclear ambitions or unrest in Nigeria, a major oil exporter.

Analysts also remarked that sixty dollars a barrel was a psychological support level, and a huge decline to US$55 was likely if the markets received any more bearish information.
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US trade review talks of hauling China to the WTO
New York, USA: The US government has threatened to report China to the World Trade Organisation if Beijing does not reduce trade barriers and take stronger action to prevent intellectual property theft. The threat has come on the back of a thorough review of US trade relations with China launched by the US Trade Representative's office.

The US Trade Representative, Rob Portman, said that the US was working with the EU on the issue of trade of car parts, but still hoped to resolve the impasse without legal action."This is a very specific issue where we would like to see immediate resolution," Portman said. He said the US would use "all options available" to meet its goals.

"Despite three consecutive years of growing US exports to China, our bilateral trade relationship today lacks equity, durability and balance in the opportunities it provides," Portman said.

"The time has come to readjust our trade policy with respect to China. As a mature trading partner, China should be held accountable for its actions and required to live up to its responsibilities, including opening markets and enforcing intellectual property rights."

Critics however lashed out at the Bush administration for its failure to tackle the issue earlier, as well as the omission in the report of any mention of the Chinese currency. They said that the administration's failure to aggressively prosecute China's unfair trading practices contributed to last year's record US$716bn trade deficit. US manufacturers have claimed over the years that China keeps the yuan artificially low to boost its exports.

Although the Trade Representative's report stopped short of asking Congress for more powers to sanction Beijing, Portman did announce the creation of a special task force which will step up enforcement of domestic and international trade rules toward China.
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European airlines offices raided on cartel charges
Brussels, Belgium: EU and US competition authorities raided the offices of many of Europe's leading airlines yesterday, including British Airways, as part of an investigation into alleged price-fixing on cargo operations.

The European commission and the US justice department said they were coordinating an international inquiry into whether carriers were in effect operating a cartel on carrying freight.

BA confirmed that it had "received a request for information" from the two authorities and was cooperating. "British Airways' policy is to conduct its business in full compliance with all the applicable competition laws. BA is assisting the European commission and the United States department of justice with their investigation," it said.

Air France, KLM, SAS, Lufthansa and Luxembourg's Cargolux confirmed that their premises had also been visited in what were described by the commission as "unannounced inspections".
Other airlines such as LanChile, Japan Airlines and Cathay Pacific are also under scrutiny.

The move is part of a EU crackdown on unfair competition, with the EU competition commissioner launching a crackdown against cartels and offering leniency for firms blowing the whistle.

According to reports, one such firm may already have done so in the current investigation.

The commission said it had "reason to believe" that the companies may have violated EC treaty rules on cartels but insisted that the outcome of the investigations had not been prejudged.

In Washington, justice department spokesperson also confirmed that the anti-trust division was "investigating the possibility of anti-competitive practices in the air cargo industry". Cartel activity is a criminal offence in the US and can carry lengthy prison terms. In Europe, the commission has the authority to levy fines of up to 10 per cent of annual turnover.
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US$7bn royalty relief for oil majors in the US
Washington, USA: Following a report in The New York Times, Democratic lawmakers and the White House both said on Tuesday that oil and gas companies should not receive lucrative incentives with energy prices at near record highs.

The lawmakers and senior Bush administration officials were responding to a report in The New York Times on Tuesday that energy companies are expected to avoid US$7bn in royalty payments to the federal government over the next five years.

The Interior Department forecasts that energy companies will produce about US$65bn worth of oil and gas in federal waters in the Gulf of Mexico on which they will not pay any royalties to taxpayers.

Even as administration officials said that their hands were tied on the royalties by laws dating back to 1996 and then sweetened by the Clinton administration, two Senate Democrats said that they were drafting legislation to change the government's rules. In the House of Representatives, four leading Democrats said they would introduce a bill this week to stop the incentives immediately.

White House officials reacted sharply to criticism from Democrat lawmakers pointing out that the incentives stemmed largely from specific decisions that the Clinton administration made in 1998 and 1999. At the time, the government was seeking to increase domestic production at a time when prices were comparatively low.

Administration officials, however, did not suggest that they would try to halt the benefits that energy companies are expected to receive on the basis of existing regulations. Congressional analysts also were skeptical that Congress had the power to alter commitments now embedded in thousands of federal leases that energy companies bid on through auctions.

In general, the Interior Department charges energy companies that pump oil and gas on federal property a royalty of 12 percent or 16 percent on the sales value of what they produce. But the government has also given billions of dollars' worth of "royalty relief" to companies that drill in deep waters of the Gulf of Mexico.

In most cases, government regulations also suspend those benefits when energy prices climb above certain "threshold levels," which have been exceeded for more than two years now.

The Clinton administration waived those price limitations for leases awarded in 1998 and 1999, however, and the Interior Department estimates that those leases will account for most of the $65 billion in royalty-free oil and gas pumped over the next five years.

A number of energy companies are challenging the Interior Department's authority to stop the giveaways for any leases awarded from 1996 to 2000. The companies argue that Congress never gave the administration authority to impose "price thresholds" during those five years.
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