What hurt consumers and investors?
Interview: Fimat USA---Kilduff, John---Vice President
chubb is raising its forecast after profit rose. shares of the second biggest u.s. insurer of corporate directors and officers got a boost in the trading session. see them up now more than 4.5%. chubb raised its 2003 forecast 30 cents to between $4.90 and $5.30 a share. last quarter net income climbed to $252.1 million or $1.45 a share from $1.20 a year earlier. profit excluding investment gains and losses was $1.37 compared with the thompson financial forecast of $1.03. chubb shares have risen in the regular session. they continue to add on in extended trading. price of gold futures in new york had their biggest drop in two weeks. it closed at 1.5% lower at $356 an ounce. crude oil, meantime, rose 44 cents to $30.68 a barrel after a report by the u.s. energy department showed that nationwide inventories of gasoline fell more than expected last week. opec meets tomorrow in vienna. it is expected that the supplier of 1/3 of the world’s oil will maintain its output quotas. crude above $30 a barrel with trouble in iraq, venezuela and nigeria, would maintaining output hurt consumers and investors? john killda with fee matt u.s.a. let’s talk about the inventory numbers. what stuck out for you the most?
>> well, finally gasoline demand hit the summertime levels we are accustomed to seeing. they were laggard, surprising giving given the economy and other factors would have pushed everybody into their cars sooner. but finally america seemed to have hit the road and gotten some demand out there.
>> now, is it because americans are out there on the road or is it because the balance and the control of the supplies among the downstream retailers is -- could have been a little out of whack? do we know people are on the road using that gas?
>> it is an implied demand figure, but certainly that there was an uptick and draw down in the available inventory. so certainly we saw a pickup and people hitting the road. i think also it’s a carry over from the fourth of july weekend and the other big weekends, where the draw downs are showing up in nationwide inventories.
>> do you expect to see that in future reports?
>> not really. we’ve seen, i think this might be the peak. actually many people will be heading back to their regular routines over the nextwave couple of weeks in mid august. the rest of the country a lot of schools start to go back into session. i think this will be the high point for demand which is going to prove to be a lackluster demand season for gasoline this year.
>> as it all stands. opec meets. doesn’t seem like a heck of a lot is expected out of this. what’s your sense of what they are going to do without the levels?
>> they are going to let it ride. they are flush with success. ed oil prices have been at the top of or even exceeding slightly their stated ban of $22 to $28 a barrel basis where they are selling it at their well head. they are doing quite well. there are problems in the market that are persisting, not going away. you mentioned it into the lead. venezuela still hasn’t gotten its act backing the after the strikes that were occurring down there. the iraq situation has been well talked about in terms of damage to the industry after the war. the problems in nigeria only exaser bait the situation in the u.s., because of the fact that there crude is so well-suited to many of our refineries.
>> we look at the chart since the beginning of the year of crude. we see one commodity on the bloomberg terminal. obviously this is the ramp up to war, this is the war and the war is over. since then it’s been choppy. from this low here whiches to be about, well, you have about $26 there?
>> yes.
>> just below that. then things have come back quite a bit. they’ve been bouncing around this $29 to $32 level. you expkt to see it kind of settling in this range or what kind of move do you see ahead?
>> the lead up here is really the fears that iraq’s oil infrastructure in particular was going to potentially get damaged and maybe some of their neighbors if there was any fight put up by iraq. once obviously the war was really never fought by them, we collapsed. but what you are seeing in this subsequent rally is the realization that in fact iraq’s oil infrastructure has been heavily damaged, not by the fighting but by the sabotage and more importantly, particularly in the south, by the looting that went on. oil installations were picked apart for every piece of scrap metal you could possibly imagine. the pictures and reports are unbelievable and they are really on their backs right now.
>> all things considered, there was talk ahead of the war that with inventories low and with the potential for war in the mideast, that you could see oil at $40, $50, $60 a barrel. there were a lot of naysayers and doom sayers out there talking about that. we haven’t seen anything near that. indeed, this is still within a comfortable range, isn’t it economically?
>> i think above $30 a barrel this has always been a price level that has been scary to the economy, and really has preceded the last four recessions. the economy is showing some amazing resiliency or maybe it’s not, as the economic recovery keeps getting pushed back quarter after quarter after quarter. i think this is going to be sort of an achilles heel. i think there was some belief, there was certainly a belief on my part that venezuela back, the iraq war going so well, that there would be plenty of oil, and i still think that dynamic is going to flip, where crude oil goes into surplus outstripping demand quite easily. but there are these meddlesome problems that won’t go away.
>> john kikluff, vice president of femat u.s.a..
