By Kenneth Bredemeier
Washington Post Staff Writer
 

Oil prices jumped 4.7 percent yesterday as traders interpreted the weekend return to power of Venezuelan President Hugo
Chavez as a sign that the South American nation would continue to adhere to its recent policy of restricting production to prop
up prices.

The May price for light sweet U.S. crude contracts rose $1.10, to $24.57 a barrel, on the New York Mercantile Exchange
even as Chavez, who spent two days in a military prison before reassuming his presidency early Sunday, made conciliatory
gestures toward Venezuela's state-run oil company.

The million-member Venezuelan Workers Confederation and the business association Fedecamaras called a general strike last
week to protest Chavez's appointment of a new board of the oil company. After his reinstatement, Chavez accepted the
resignation of that board and the company president. The national oil monopoly, Petroleos de Venezuela SA, which is the
third-largest oil supplier to the United States, then said it would resume production, refining and exports this week.

Despite that, traders quickly bid up oil prices, wiping out two-thirds of the $1.59-per-barrel drop in prices on Friday when
Chavez was ousted. His overthrow had led many oil-industry experts to believe then that Venezuela would soon crank up its
production, never mind the 2.5 million-barrel-a-day quota set by the Organization of the Petroleum Exporting Countries.
Greater production translates to lower prices.

Until the democratically elected Chavez's ascent to power in 1998, Venezuela routinely produced more oil than its OPEC
quota, as much as 44 percent more, in an effort to gain world market share. But Chavez had mostly adhered to the OPEC limit
for his country, thus helping boost world oil prices.

For U.S. consumers, Chavez's return to the presidential palace in Caracas is double-edged, bringing renewed oil shipments to
the United States, but also ensuring that the recent 20 percent run-up in the price of gasoline to a nationwide average of $1.42
a gallon for unleaded will not soon weaken.

Phil Flynn, vice president and senior analyst for Alaron Trading Corp. in Chicago, called Chavez's return to power "very
significant," especially to the survival of OPEC and its oil production quota system. "To have Chavez out of there would have
been a great coup for the U.S.," he said. "Chavez made sure Venezuela stayed within OPEC's guidelines."

Conversely, Flynn said that if Chavez were removed from the world oil scene, "Venezuela and Russia could have teamed up
and thereby reduced OPEC's position as a world oil power. It could have opened up a lot of possibilities."

Another oil analyst, Ric Navy of BNP Paribas Commodity Futures Inc. in New York, said that oil industry experts feel
Chavez's return will make prices higher, "and there's a potential for further increases."

There's still uncertainty in the markets. Said Navy, "He's president today, but what about tomorrow?"

And that uncertainty extends well beyond Venezuela, particularly because of the continuing fighting in the Mideast between the
Palestinians and the Israelis.

Iraq announced a 30-day oil export boycott last week in an effort to put pressure on Israel to withdraw its troops from the
West Bank, prompting renewed fears of oil shortages. Iranian President Mohammad Khatami yesterday called on Muslim oil
producers to halt supplies for a month to protest Israel's attacks on West Bank Palestinians.

But so far, other Arab oil producers have not joined them, and Saudi Arabia, the biggest Mideast oil producer, has pointedly
said that oil production should not be used as a means to enforce political will in the region.

                                 © 2002