QUITO, Ecuador (Reuters) – Ecuador on Saturday rejected protesters’
demands that it release dozens of people held on suspicion of
vandalizing oil fields, pushing the six-day-old crisis into a stalemate
that could jack up world petroleum prices.

The attacks, led by activists seeking more local investment by
multinational oil companies drilling in the Amazon region, helped raise
U.S. crude oil futures by $2 to more than $65 a barrel on Friday.

After Venezuela, Ecuador is the second largest South American supplier of oil to the United States.

Protesters invaded oil fields in two provinces on Monday, dynamiting
pipelines, vandalizing pumping machinery and blocking highways to
demand that foreign oil companies pay for infrastructure and provide
more jobs.

The attacks will continue until the government frees at least 80
protesters who were arrested, said Guadalupe Llori, the elected prefect
of Orellana province in eastern Ecuador.

“First this and then we will start negotiating,” she told Reuters.

The government said the violence must end before any talks can begin.

“These people have attacked the property of the Ecuadorean people,”
presidential spokesman Andres Seminario told Reuters. “They need to
stop before we will negotiate with them.”

Meanwhile, Ecuador’s oil company Petroecuador struggled to increase
production and repair damage. “There has been serious damage and we
still can’t get into all of the oil fields,” a company spokesman said.

PRODUCTION PLUMMETS

Production by the state-owned company, which suspended exports on
Thursday, totaled a rate of 33,167 barrels per day on Saturday,
compared to 201,000 bpd before protests began in the provinces of
Orellana and Sucumbios, he said.

The government says it will take until November to restore
Petroecuador’s production. Oil output by private companies has been
reduced to nearly zero, Rene Ortiz, president of the Ecuadorean
Hydrocarbons Association, told Reuters.

Ecuador, with only a nine-day supply of reserves left, is seeking a
loan of oil from Venezuela to meet its export commitments. It will also
import fuel for domestic use and seek a $400 million loan from the
Latin American Reserve Fund to avoid balance-of-payment problems from
the oil stoppages.

Venezuelan Foreign Minister Ali Rodriguez said that a meeting would be
held in Caracas on Monday to study the request and the availability of
Venezuelan crude.

“Venezuela is always prepared to assist other countries of Latin America and the Caribbean as far as it can,” Rodriguez said.

The protests have been the biggest challenge to President Alfredo
Palacio since he was appointed in April after Congress fired President
Lucio Gutierrez for meddling in the Supreme Court. The government has
accused Gutierrez, who is in exile in Peru, of being behind the unrest.

The protesters also want the government to renegotiate contracts with
Occidental Petroleum Corp., Petrobras and EnCana Corp., to raise state
participation.

Isolated acts of vandalism continued on Saturday, including attacks on
small pipelines. But army troops and police are gradually restoring
order since the government declared a state of emergency in Orellana
and Sucumbios on Wednesday.

Under the emergency, authorities can restrict freedom of movement and association and censor media in the area.