Energy Sector Roundup: Oil Rises on Persian Gulf Encounter
NEW YORK—Following is a summary of top stories in the energy sector Friday afternoon.
Iran Tension Send Oil Higher
Oil prices rose sharply on news that a ship under contract to the Defense Department fired warning shots at two boats in the Persian Gulf. Retail gas prices rose further into record territory, nearing $3.60 a gallon.
Crude prices rose on initial reports that the U.S. ship fired on two Iranian boats. The news raised concerns that conflict between U.S. and Iranian forces could cut oil supplies from the region. Iran's official Arabic language television station, Al-Alam, said the boats were not Iranian. U.S. officials said the boats appeared to be Iranian, and were similar to ones they encountered in the past.
The news was enough to send light, sweet crude for June delivery up to $119.55 before retreating to settle up $2.46 at $118.52 a barrel on the New York Mercantile Exchange.
In other Nymex trading, May gasoline futures rose 3.51 cents to settle at $3.0537 a gallon after earlier hitting a new trading record of $3.0815. May heating oil futures added 4.45 cents to settle at $3.3028 a gallon, and May natural gas futures gained 17.3 cents to settle at $10.963 per 1,000 cubic feet.
Congress Wants FTC to Probe Gasoline Pricing
With oil and gasoline prices at record highs, Democrats in Congress are again calling for the FTC to look into possible market manipulation.
"In light of nationwide consumer concern about the record prices for oil and gas at the pump, we urge the Federal Trade Commission (FTC) to immediately initiate a rulemaking to implement the market manipulation authority mandated by Congress in the Energy Independence and Security Act of 2007," the lawmakers said in a letter signed by House Speaker Nancy Pelosi, House Majority Leader Steny Hoyer and others.
"FTC has acknowledged that oil and gas markets are susceptible to manipulation. In 2006, the FTC's Congressionally-mandated investigation of gasoline prices after Hurricane Katrina acknowledged the possibility that the petroleum industry can manipulate prices by reducing production, distribution, or inventories or increasing margins," the lawmakers wrote.
"We need aggressive oversight to ensure such actions are not presently occurring, and to punish them if they are cheating consumers."
Militants and Strikers Disrupt Nigeria Supplies
Militants attacking major oil operations in Nigeria and workers hoping for a pay rise are slowing the country's petroleum industry.
Royal Dutch Shell PLC's joint venture confirmed that one of its pipelines had been hit, as militants in the Niger Delta promised more violence.
White-collar workers at Exxon Mobil Corp.'s joint venture have "commenced a safe and orderly shut-in of production" to push for more pay, the company said in a statement.
No estimate yet on how much oil production is affected. Nigeria exports over a million barrels a day to the U.S.
Strike Set for Key UK Refinery
A two-day strike set to begin Sunday at the Grangemouth oil refinery in central Scotland is expected to lead to some disruption in U.K. energy supplies.
The strike over pension benefits will force BP to shut its Forties Pipeline System, which delivers a significant portion of the country's North Sea oil production.
BP plans to turn off the pipeline that carries more than 20 percent of U.K. oil production on Saturday in advance of the job action at Grangemouth, one of Britain's largest refineries. The pipeline is powered by electricity and steam normally supplied by Grangemouth.
"Preparations to shut down the pipeline are in being carried out, but we hope this doesn't happen," he said. "Our fear is that it could be sometime before it is up and running again," said BP spokesman Robert Wine.
Petrobras Becomes an Oil Importer
Petrobras downstream director Paulo Roberto Costa said Brazil's state-run oil firm became a net importer of oil and oil products in the first quarter, spending $775 million more on imports than exports.
That amounts to 626,000 more barrels brought into the country than shipped out. Last year Petrobras was a net exporter of petroleum products.
Costa said the situation could be reversed as early as the second quarter of 2008, when five new platforms go online and five others reach peak production.
Petrobras has kept investors tingling with reports of huge oil and gas finds. In November, the company announced discoveries in the Tupi offshore field, which could hold as much as 8 billion barrels of light crude. That was followed with news of a big offshore natural gas discovery -- in the Jupiter field -- in January.
Earlier this month the head of Brazil's National Petroleum Agency talked about another huge offshore oil discovery. Petrobras said it is still assessing how large the reserves might be in that field.
More Rigs Working in U.S.
The number of rigs actively exploring for oil and natural gas in the U.S. this week rose by 15 from last week to 1,842. A year ago, the rig count stood at 1,747.
Baker Hughes Inc., which tracks rig activity worldwide, said this week 1,473 rigs are exploring for natural gas and 360 for oil. Nine are listed as miscellaneous.
There are 67 rigs operating offshore, most of them in the Gulf of Mexico.
In Canada, 88 rigs are running, down eight from the week before.
Forecast Says More Hurricanes Could hit U.S. This Year
Private weather forecaster AccuWeather.com expects a slightly above-average hurricane season this year with a greater chance for storms making U.S. landfall.
Chief forecaster Joe Bastardi says weakening La Nina conditions and an ongoing warm water cycle in the Atlantic could point more storms towards the U.S. mainland.
"The warming is not uniform across the entire Atlantic. In some areas where hurricanes normally form -- the central and eastern tropical Atlantic -- ocean water temperatures are near or below normal. This should limit the number of storms, so we do not expect a near record high number like in the 2005 season," Bastardi said. "The warmest waters relative to normal will be in the northern areas of the Atlantic, especially toward the North American continent. This could potentially increase the threat of major landfalls to the U.S. coast."
Oppenheimer Starts Ethanol Coverage
Shares of ethanol producers rose after Oppenheimer & Co. initiated coverage of three companies, saying overcapacity could cease to be a problem in the next six to 12 months.
Analyst Joseph A. Gomes Jr. started Verasun Energy Corp., Aventine Renewable Energy Holdings Inc. and Pacific Ethanol Inc. at "Perform."
The rating means he expects the shares to perform in line with the broad-based S&P 500 index over the next 12 to 18 months and reflects "the difficult near-term operating environment resulting in limited upside to near-term operating results caused by rising corn prices and a glut of capacity supply."
In a client note, Gomes called Brookings, S.D.-based Verasun the leading pure play ethanol producer and said its purchase of St. Paul, Minn.-based U.S. BioEnergy will be "a game changer."
The combined business is expected to have more than 1.6 billion gallons of capacity by the end of this year. He projects 2008 earnings of $80 million, up from last year's $26.6 million.
Shares of VeraSun rose 30 cents, or4.6 percent, to $6.90 in afternoon trading.
The analyst said Aventine could become a "long-term winner" but faces a liquidity crunch as well as challenges common to the sector.
Aventine shares added 32 cents, or 7.9 percent, at $4.36.
Gomes praised Pacific Ethanol's strategic decision to place facilities near local ethanol end-markets to cut transportation costs. However, rising costs, interest expense and preferred dividends may result in a wider loss this year, he said.
Shares of Pacific Ethanol gained 51 cents, or 15.8 percent, at $3.73.
--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.
