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Powell confident in Saudi oil production

Futures hit record above $42 a barrel

KHOBAR, Saudi Arabia -- Saudi forces fought a gun battle with militants yesterday, stepping up a nationwide hunt after a suspected Al Qaeda attack on the world's biggest oil exporter over the weekend.

Secretary of State Colin L. Powell said he was confident Saudi Arabia could provide secure oil supplies, but amid market jitters crude oil futures surged above $42 a barrel, the highest price since trading in such futures began 21 years ago.

The shootout occurred near the kingdom's western city of Ta'if, close to the Muslim holy city of Mecca, when gunmen fired on a police checkpoint in the mountainous region, a government source said. He said no other details were available.

It was not immediately clear whether the gunmen had any link to the shooting and hostage-taking rampage in the eastern city of Khobar over the weekend, the second major attack on the Saudi oil industry in a month. Twenty-two people were killed in the attack, 19 of them foreigners.

''I have confidence in the ability of the Saudi Arabians to continue to provide a secure flow of oil product," Powell told reporters in Washington.

Powell said he expected Saudi Arabia to do more to combat militants through tighter law enforcement and border controls, more intelligence sharing, and greater efforts to halt financing.

''They have been doing a great deal in recent months and I would expect them to do more," he said.

Washington has urged its citizens to leave Saudi Arabia because of the violence, and other Western governments have told their nationals to avoid all but essential travel to the kingdom, which has large numbers of Westerners in its workforce.

Before yesterday's shootout, Saudi forces had launched a huge manhunt for three militants who escaped after the Khobar attack, setting up checkpoints and roadblocks across the kingdom.

King Fahd and other senior members of the royal family, whose forces have been battling for more than a year to stamp out attacks by Saudi-born Osama bin Laden's Al Qaeda, have vowed to beat the militants.

Saudi Arabia says it will keep oil supplies flowing and has proposed that an OPEC meeting in Beirut later this week should raise output limits to help ease present high oil prices that are threatening global economic growth.

Many foreigners living in Saudi Arabia said the Khobar rampage could have been averted if security had been tighter.

''My reaction Saturday morning was shock. Sunday morning it was grief and Monday morning it was anger because some of this could have been prevented," said Dave Cantrell, head of the American Business Association.

He said at least four firms had evacuated their employees.

French oil firm Total said its employees in Saudi Arabia had been moved to an undisclosed safe location but it was not evacuating them. Sinopec International Petroleum Exploration and Production Corp said it was not planning to evacuate staff from Khobar.

The heavily protected Saudi oil infrastructure has not been hit and oil supplies have not been disrupted. But some market traders fear militants may shift from soft targets to production and export facilities.

Saudi forces sealed off two Khobar areas in which residents said they saw militants, but no one was caught.

Witnesses and security sources said authorities arrested a Saudi prayer caller at a mosque because they suspected he was harboring militants.

A purported Al Qaeda statement on the Internet said the group carried out the weekend attack. The group's leader in Saudi Arabia, Abdulaziz al-Muqrin, has vowed 2004 would be ''bloody and miserable" and issued plans for urban guerrilla warfare.

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