Chris Kahn

Oil, gasoline up on crude pipeline leak

NEW YORK — Retail gasoline prices increased today as crews continued to work on a broken Midwest pipeline that transports a quarter of the oil imported from Canada to the U.S.

Retail gas prices added a penny overnight to a national average of $2.709 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular unleaded is 5.2 cents cheaper than it was a month ago and 13.6 cents higher than it was last year. In Houston today, drivers paid an average of $2.490 a gallon, up from $2.479 Sunday.

The national average was skewed by abnormally higher prices in the Midwest, where Enbridge Energy’s crude oil pipeline broke. The Line 6A in Romeoville, Ill., about 30 miles from Chicago, is part of a system that transports oil from western Canada to U.S. refiners. Marathon Oil Corp., which operates a refinery in Robinson, Ill., about 225 miles south of Chicago, would not comment on whether it faced shortages because of the pipeline shutdown.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said the pipeline helped push wholesale gas prices in the Midwest about 30 cents per gallon higher than the West Coast and 15 to 20 cents per gallon higher than the East Coast.

The jump in prices is “based mostly on perception,” Kloza said, as the U.S. continues to sit on the largest supply of oil and petroleum-based fuels on record. Fuel supplies may be tighter in the Midwest as farmers harvest their crops and push diesel demand higher, but refineries are still receiving oil despite the pipeline problem, he said.

“In the meantime, if you’re someone who needs to buy 100,000 barrels of gasoline or diesel by the end of this month, there’s probably a little bit of panic setting in,” Kloza said. The price of oil and gasoline have surged on spot markets as doubts linger about when Enbridge can get the pipeline back up and running.

That’s pushed gasoline and diesel prices higher, Kloza said.

According to the Oil Price Information Service, motorists in Warren, Ind., have been stung with the biggest price hikes. Pump prices there have soared 34.7 cents per gallon since Sept. 1.

Boyd, Ky., saw an increase of 34.3 cents per gallon in the same time, and Hillsdale, Mich. saw prices jump 32.4 cents per gallon.

Enbridge, based in Houston, wouldn’t say when the pipeline would be operating again. An estimated 6,100 barrels of crude oil were spilled last week after the pipeline broke.

The futures contract for benchmark crude also increased today, rising above $77 a barrel. Prices followed the stock market higher as investors cheered reports that Chinese industrial production was accelerating. China said over the weekend that manufacturing rose 13.9 percent in August from a year ago, faster than the 13.4 percent growth pace in July.

A weaker dollar also contributed to rising oil prices by making crude cheaper for investors holding other currencies.

Benchmark crude for October delivery added 74 cents to settle at $77.19 a barrel on the New York Mercantile Exchange. In London, Brent crude rose 87 cents to settle at $79.03 a barrel on the ICE Futures exchange.

In other Nymex trading in October contracts, heating oil rose 1.83 cents to settle at $2.1227 a gallon and gasoline added less than a penny to settle at $1.9806 a gallon. Natural gas gained 5.5 cents to settle at $3.938 per 1,000 cubic feet.

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Natural gas prices slump to 2010 low

NEW YORK  — Natural gas prices today slumped to a record low for the year after the government reported a rise in U.S. supplies.

The contract for September delivery gave up 5.4 cents to settle at $3.817 per 1,000 cubic feet on the New York Mercantile Exchange. Earlier in the day, it hit a 2010 low of $3.794.

The price of natural gas, which is used to produce electricity, tends to drop this time of year as the weather begins to cool and people turn off their air conditioners. Analysts said natural gas contracts should continue to fall over the next few months, and that should eventually push down energy costs for homes and businesses.

Meanwhile, retail gasoline prices continue to be pushed down by lower oil prices since the beginning of August.

Pump prices have dropped for 16 straight days. They fell less than a penny overnight to a new national average of $2.688 for a gallon of unleaded regular, according to AAA, Wright Express and Oil Price Information Service. A gallon of gas is 5.4 cents cheaper than a month ago but 6.6 cents more expensive than the same time last year.

Natural gas prices typically rise again as winter approaches and home owners crank up the heat. But overall, PFGBest analyst Phil Flynn said natural gas should become cheaper as drillers tap into larger sections of underground shale. America’s vast natural-gas shale deposits are just beginning to be exploited, and the industry is expected to produce much more in coming years.

“Last September, we saw natural gas prices crash down to about $2.50 (per 1,000 cubic feet), and we saw producers cut back a bit” and waited for prices to rebound, Flynn said. “But because of shale gas, that point of pain – the point where they cut back – has been dropping.”

Oil prices increased for a second day after six straight days of declines, as the dollar fell and investors latched onto a government report that new requests for unemployment benefits fell sharply last week.

Benchmark oil for October delivery added 84 cents to settle at $73.36 on the Nymex. In London, Brent crude jumped $1.54 to settle at $75.02 a barrel on the ICE Futures exchange. Oil has tumbled from a high of $82.55 earlier this month, and some investors are buying on the expectation that oil prices are set to rebound again, Flynn said.

“As long as Chinese demand remains strong and a case for global consumption strength next year is able to be argued, crude values could easily begin tracking north back toward the $80 area,” independent analyst Jim Ritterbusch said.

In other Nymex trading in September contracts, heating oil rose 3.86 cents to settle at $2.0092 a gallon and gasoline gained 4.46 cents to settle at $1.9085 a gallon.

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Gasoline, oil prices are on the slide

Gasoline prices are now a penny below where they were a week ago and could head lower after a retreat in oil prices over the past few days.

The national average for a gallon of unleaded gasoline was $2.770 on Friday, compared with $2.776 on Thursday and $2.779 a week ago, according to AAA, Wright Express and Oil Price Information Service.

Oil prices continued slipping after falling more than $5 in the first four trading sessions of the week. Benchmark crude for September delivery fell 35 cents to settle at $75.39 a barrel on the New York Mercantile Exchange, its lowest level in a month.

The rally in early August that pushed prices above $82 has been reversed. Investors appear to be giving into fears that second-half global economic growth will be slower than previously expected.

Andrew Lebow, an oil trader with MF Global in New York, investors have been discouraged by lower-than-expected oil imports in China and the disappointing growth in the U.S. economy.

“A lot of optimism that we had a few weeks ago has been dashed,” Lebow said.

On Friday, the Commerce Department reported that, excluding autos and gasoline sales — which accounted for one-fourth of the July figures — retail sales fell 0.1 percent in July, continuing a recent weak trend.

“The ghosts of a global economic slowdown are back and haunting the oil market again,” Barclays Capital said in a report. “No doubt, like China, the growth in U.S. oil demand is likely to slow down as the months progress.”

In other Nymex trading in September contracts, heating oil was down less than one cent to $1.9956 a gallon, gasoline fell 1.52 cents to $1.9396 a gallon and natural gas gained 3.2 cents to $4.328 per 1,000 cubic feet.

In London, Brent crude was down 29 cents at $75.11 a barrel on the ICE Futures exchange.

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Associated Press writers Pablo Gorondi in Hungary and Alex Kennedy in Singapore contributed to this report.


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Oil stays below $76, gasoline prices slide lower

Gasoline prices are now a penny below where they were a week ago and could head lower after a retreat in oil prices over the past few days.

The national average for a gallon of unleaded gasoline was $2.770 today, compared with $2.776 on Thursday and $2.779 a week ago, according to AAA, Wright Express and Oil Price Information Service.

In Houston today, drivers paid an average of $2.585 a gallon, down from $2.590 Thursday.

Oil prices continued slipping after falling more than $5 in the first four trading sessions of the week. Benchmark crude for September delivery fell 35 cents to settle at $75.39 a barrel on the New York Mercantile Exchange, its lowest level in a month.

The rally in early August that pushed prices above $82 has been reversed. Investors appear to be giving into fears that second-half global economic growth will be slower than previously expected.

Andrew Lebow, an oil trader with MF Global in New York, investors have been discouraged by lower-than-expected oil imports in China and the disappointing growth in the U.S. economy.

“A lot of optimism that we had a few weeks ago has been dashed,” Lebow said.

Today, the Commerce Department reported that, excluding autos and gasoline sales — which accounted for one-fourth of the July figures – retail sales fell 0.1 percent in July, continuing a recent weak trend.

“The ghosts of a global economic slowdown are back and haunting the oil market again,” Barclays Capital said in a report. “No doubt, like China, the growth in U.S. oil demand is likely to slow down as the months progress.”

In other Nymex trading in September contracts, heating oil was down less than one cent to $1.9956 a gallon, gasoline fell 1.52 cents to $1.9396 a gallon and natural gas gained 3.2 cents to $4.328 per 1,000 cubic feet.

In London, Brent crude was down 29 cents at $75.11 a barrel on the ICE Futures exchange.

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Marathon earnings beat estimates

Marathon Oil Corp. said Tuesday its second-quarter earnings jumped 72 percent on higher oil and gas prices and better refining margins.

The results beat Wall Street estimates and follow similar gains by oil giants such as Exxon Mobil Corp. and Chevron Corp.

The Houston-based oil company reported net income of $709 million, or $1 per share, for the quarter ended June 30. That’s up from $413 million, or 58 cents per share, in the year-ago period. Revenue jumped 39 percent to $18.6 billion.

Excluding special charges, Marathon said it would have earned $792 million, or $1.11 per share.

Analysts surveyed by Thomson Reuters expected earnings of 81 cents per share on revenue of $19.7 billion. They typically exclude special charges from their estimates.

Its refining and wholesale marketing business saw gross margins rise 54 percent.

The company’s refineries and exploration and production business both reported profits in the quarter. Its oil sands mining business reported a loss of $60 million in the quarter.

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Big Oil’s profits continue to be pumped

NEW YORK — The major oil companies continue to climb back from the recession, with higher fuel prices driving up earnings.

After setting record profits in 2008, the oil industry tanked last year as the global economic downturn induced a dramatic drop in oil and natural gas prices. On Thursday, Exxon Mobil Corp. said it earned $7.56 billion in the second quarter, its best result since the last three months of 2008. Royal Dutch Shell Group posted a 15 percent gain in net income. A day earlier, ConocoPhillips said net income nearly tripled in the April-June period.

Chevron Corp. reports its quarterly results today.

The jump in profits comes as oil companies wait out a ban on deep-water drilling in the Gulf of Mexico that is scheduled to last until Nov. 30. Shell took a $56 million charge for idling its rigs while Exxon Mobil halted work on an appraisal well and suspended operations at one of its Gulf platforms.

But their operations are so vast that the impact is likely to be minimal. And both remain committed to drilling in deep water around the globe, including the Gulf. Irving-based Exxon Mobil continues to explore the deep waters off countries including Indonesia and the Philippines.

“Slight delay in the Gulf, but we’re proceeding full speed ahead in the rest of the world,” Exxon Mobil Vice President David Rosenthal said in a conference call with investors.

Shell said it plans to wait out America’s six-month ban on exploratory drilling.

“We are just trying to keep the rigs warm, ready to start up again,” Shell Chief financial officer Simon Henry said.

Net income for the second quarter rose to $4.39 billion from $3.82 billion a year earlier, Shell said.

For BP, of course, the Gulf is paramount at the moment. It will be paying for years for the oil spill set off in April when the Deepwater Horizon rig exploded and sank. The British oil company took a charge of $32.2 billion to cover the costs that it can reliably estimate at this time. On Tuesday, it reported a record quarterly loss of $17 billion.

BP, however, remains committed to deep-water projects. The company plans to begin drilling a well off the coast of Libya in coming weeks.

Argus Research analyst Phil Weiss said Exxon, BP and Shell have no choice but to keep exploring the deep sea. Most of the world’s oil reserves are in the hands of state-owned companies, he said.

“Deepwater is one of the few places where they can grow.”

For its second quarter, Exxon Mobil’s net income nearly doubled as oil prices rose to an average of $78.16 from $59.80. Revenue increased 24 percent to $92.5 billion. The company boosted oil and natural gas production by 8 percent. Refining margins also improved as gasoline demand increased.

Per-share earnings rose to $1.60 from or 81 cents. Analysts had expected $1.46 per share on revenue of $98.5 billion. Shares fell 57 cents to $60.34.

In the year-ago quarter, Exxon Mobil’s $3.95 billion profit set a six-year low. The drop came just three quarters after Exxon set the record profit for a U.S. company of $14.83 billion.

Unlike BP and Shell, Exxon Mobil does a relatively small portion of its business in the Gulf of Mexico.

The bulk of its income comes from exploration and production operations in foreign waters, particularly in Africa, Asia and the Middle East. Earnings from producing oil and natural gas outside the U.S. rose to $4.47 billion from $3 billion in the second quarter.

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Noble buys Frontier, reaches Gulf deal with Shell

NEW YORK — Offshore drilling services company Noble Corp. is bulking up its operations while signaling that business as usual won’t return to the Gulf of Mexico for some time.

The Swiss-based company said today it will buy privately held Frontier Drilling for $2.16 billion in cash and also struck $4 billion worth of new contracts with Royal Dutch Shell.

Noble is also giving Shell the right to suspend any contracts the two have for rigs operating in the Gulf because of the proposed U.S. moratorium on drilling in deep water.

The agreements with Shell cover two ultra deepwater projects and are subject to closing the deal with Frontier.

Shell will pay reduced fees for leasing Noble’s rigs in the Gulf. The Obama administration in May ordered a six-month halt on exploratory drilling in waters more than 500 feet deep. The ban is being disputed in the courts. Noble was stung earlier this month when Anadarko Petroleum said it planned to excuse itself from drilling contracts because of the moratorium.

Noble spokesman John Breed said the Shell deal is aimed at keeping oil companies from trying to abandon agreements altogether in the Gulf.

“We’re working with our customers to find a resolution that would allow them to keep rigs under contract,” Breed said.

Argus Research analyst Phil Weiss said the decision suggests that oil companies are digging in for an extended delay in drilling projects in the Gulf. Even if the moratorium ends, many companies are reluctant to expand in the area until they see how the government will regulate business there, he said.

“If this was going to be a short moratorium, they wouldn’t have had to come up with these kinds of solutions,” Weiss said.

The Frontier deal is expected to close by the end of July. It would add six floating drilling units to Noble’s fleet.

Noble said it should take on loans from existing lines of credit to complete the deal for Frontier, also known as FDR Holdings Limited.

Noble shares added $1.71, or 5.8 percent, to $30.99 in morning trading.

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