Oil Boom Profits

The Energy Department said natural-gas inventories fell 32 billion cubic feet for the week ended Nov. 24. Global Insight expected a decline of 18 billion. Total stocks now stand at 3.417 trillion cubic feet, up 185 billion cubic feet from the year-ago level, and 230 billion cubic feet above the five-year average, the government data said. January natural gas rose 12.9 cents to $8.99 per million British thermal units after reaching an over two-month high of $9.05 before pulling back to $8.86 in mid-day trading.

Working gas in storage was 3,417 Bcf as of Friday, November 24, 2006, according to EIA estimates. This represents a net decline of 32 Bcf from the previous week. Stocks were 185 Bcf higher than last year at this time and 230 Bcf above the 5-year average of 3,187 Bcf. In the East Region, stocks were 62 Bcf above the 5-year average following net withdrawals of 28 Bcf. Stocks in the Producing Region were 113 Bcf above the 5-year average of 897 Bcf after a net withdrawal of 5 Bcf. Stocks in the West Region were 55 Bcf above the 5-year average after a net addition of 1 Bcf. At 3,417 Bcf, total working gas is above the 5-year historical range.

Oil climbed to a two-month high near $63 on Thursday, building on the previous session's gains after an unexpected drop in U.S. winter fuel stocks and signs of solid economic growth in the world's top consumer.

U.S. crude rose 44 cents to $62.90 a barrel at 1423 GMT. It earlier hit $63.07, its highest since October 2.

Brent crude rose 76 cents at $63.83.

U.S. inventories of crude oil and refined products fell last week as imports eased and demand was robust, the Energy Information Administration (EIA) said on Wednesday .

Distillate stocks, including home heating oil, fell by one million barrels. Analysts had expected a stock build.

"The unexpected pull on U.S. stock levels was an immediate catalyst for the market to trade up," said Andrew Harrington, a natural resource analyst at ANZ Bank in Sydney.

The news pushed oil prices above $62 on Wednesday, helping the market finally break through a two-month-long trading rut.

U.S. commercial crude oil inventories declined by 0.3 million barrels compared to the previous week. At 340.8 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories dropped by 0.6 million barrels last week, and are at the lower end of the average range.

Summary of Weekly Petroleum Data for the Week Ending November 24, 2006 U.S. crude oil refinery inputs averaged nearly 15.2 million barrels per day during the week ending November 24, up 169,000 barrels per day from the previous week''s average. Refineries operated at 88.1% of their operable capacity last week. Gasoline production increased last week compared to the previous week, averaging nearly 8.9 million barrels per day, while distillate fuel production inched lower, averaging over 4.0 million barrels per day. U.S. crude oil imports averaged nearly 9.8 million barrels per day last week, down 732,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 9.9 million barrels per day, 217,000 less than averaged over the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 940,000 barrels per day. Distillate fuel imports averaged 298,000 barrels per day last week. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) declined by 0.3 million barrels compared to the previous week. At 340.8 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories dropped by 0.6 million barrels last week, and are at the lower end of the average range. Distillate fuel inventories fell by 1.0 million barrels, and are near the middle of the average range for this time of year. A decline in high-sulfur distillate fuel (heating oil) inventories more than compensated for a slight rise in diesel fuel inventories (a combination of ultra-low-sulfur and low-sulfur). Total commercial petroleum inventories plummeted by 7.5 million barrels last week, and are just above the upper end of the average range for this time of year. Total products supplied over the last four-week period has averaged nearly 21.0 million barrels per day, or 2.0% more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged 9.2 million barrels per day, or 1.2% above the same period last year. Distillate fuel demand has averaged nearly 4.4 million barrels per day over the last four weeks, or 7.1% above the same period last year. Jet fuel demand is up 0.3% over the last four weeks compared to the same four-week period last year.

Natural-gas futures touched their highest levels in over a week ahead of the expiration of the December contracts, while growing expectations that key oil producers will agree to further cut output at a meeting next month helped lift crude prices closer to $61 a barrel.

Oil rose one percent towards $60 a barrel on Monday after Saudi Arabia's oil minister said OPEC may cut output further when it meets on Dec. 14.

Surging gold also lifted oil as investment funds sought an alternative to the dollar, at a 20-month low against the euro.

U.S. crude rose to $59.86 by 4:21 a.m. ET, up 62 cents from the settlement Wednesday, the last day of trade in New York before the two-day Thanksgiving holiday.

London Brent crude gained seven cents to $60.10, adding to 68-cent gains on Friday.

Saudi Oil Minister Ali al-Naimi, OPEC's most influential voice, held out the prospect of a further output cut when the group meets next month in Abuja.

At an emergency meeting in Doha in October, OPEC agreed to remove 1.2 million barrels per day from oversupplied markets -- the first cut in two years. Since then, OPEC ministers have lined up in favor of a further reduction to underpin prices.

"We must look at the impact of the measures decided in Doha. If they are adequate, we will be satisfied, if they are not we will act again and the aim is to bring stability back to the market," Naimi told reporters.

"The longer oil stays below $60 the more chance OPEC will cut," said Tony Nunan, a risk manager at Mitsubishi Corp.

The dollar hit a 20-month low against the euro and a three-month low against the yen on Monday, amid worries over a slowdown in U.S. economic growth.

Oil has been stuck in a two-month trading rut of $58-$62 a barrel, showing few signs of resuming a climb back toward a record high of $78.40 a barrel hit in mid-July.

Oil rose towards $60 a barrel on Friday, drawing strength from a disruption to supply in Nigeria and as a fall in the U.S. dollar boosted other commodities.

The price of oil had dropped nearly $1 on Wednesday after a U.S. government report showed crude stocks rose a more-than-expected 5.1 million barrels last week, adding to ample supplies.

"It's been pretty weak recently so maybe a rally is not unexpected," said Christopher Bellew, an oil futures broker at Bache Financial in London.

U.S. crude was up 57 cents at $59.81 a barrel. London Brent gained 64 cents to $59.99 at 1424 GMT.

Supporting the market, Italian oil company Eni declared a force majeure on exports from the Okono terminal in Nigeria after it was attacked, ship agent Gulf Agency Company said late on Thursday.

Prices are vulnerable to wider fluctuations as the New York Mercantile Exchange is shut for the two-day Thanksgiving holiday while electronic trade is continuing, leaving trade thinner.

"Because of the holiday it's light volume and that sets the stage for volatility," said Mike Wittner, oil analyst at investment bank Calyon in London.

Oil steadied on Friday at around $59 a barrel in trade muted by the long U.S. Thanksgiving holiday weekend, after tumbling on a rise in stockpiles in top oil consumer the United States.

Prices dropped nearly $1 on Wednesday after a U.S. government report showed crude stocks rose by 5.1 million barrels last week, much more than expected, adding to already ample supplies.

"In this market, people would not wish to be long over the weekend," said analyst Deborah White of SGCIB. "Inventories in the U.S. remain extremely comfortable -- we had a massive crude stockbuild."

U.S. crude was down 3 cents at $59.21 a barrel. London Brent gained 5 cents to $59.40 at 1005 GMT.

The New York Mercantile Exchange is shut for the two-day Thanksgiving holiday, while electronic trade is continuing.

Oil's drop from a record high of $78.40 hit in July prompted the Organization of Petroleum Exporting Countries in October to cut oil output by 1.2 million barrels per day from November 1.

But rising inventories and analysts' skepticism over whether OPEC, which pumps more than a third of world supply, will adhere to the cutback in full has pressured prices.

On Thursday, the oil minister for OPEC's smallest producer Qatar dulled down comments made last week on the prospect of a further cut in OPEC output.

"It's too early now to jump to the front seat and say what we will do, what is the quantity if we want to cut," Abdullah bin Hamad al-Attiyah told reporters in Seoul.

Last week Attiyah told Reuters OPEC had "no choice but to accept a cut" when it meets in Nigeria next month, and that a $60 U.S. crude oil price was "moderate".

Prices over the past few weeks have dipped below $55 before rebounding to around $60 despite bulging U.S. inventories and warm winter in the United States suppressing demand.

Crude-oil prices dropped Wednesday as traders awaited the weekly U.S. oil inventory report, a day after climbing above $60 a barrel on news of temporary supply disruptions.

Analysts are expecting the weekly report to show that U.S. supply of gasoline and distillates, which include heating oil and diesel fuel, dropped for the seventh straight week.

"Day-to-day events and commentary will continue to push prices up and down in the short term, but until something new of significant fundamental import surfaces, prices will most likely remain fairly close to the current range," said John Kilduff at Fimat USA.

Light sweet crude for January delivery fell 23 cents to $59.94 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. On London's ICE Futures exchange, January Brent was down 26 cents to $60.13 a barrel.

Meanwhile Wednesday, gunmen in Nigeria seized seven hostages from an Italian oil supply vessel off the southern coast. Two private security contractors confirmed the overnight incident on a vessel belonging to Agip, a subsidiary of Italian oil giant Eni SpA.

The kidnappings were the latest in a series of attacks on oil installations in the volatile Niger Delta, where most of Nigeria's oil is produced. Each attack raises market concern about how the violence may affect the oil supply.

Oil rose above $60 on Tuesday following news that the Trans-Alaska Pipeline was flowing at just 25 percent of its normal 800,000 barrel-a-day capacity, as strong winds disrupted tanker loading. Also, traders worried about shutdowns at Exxon Mobil Corp.'s refinery in Baytown, Texas, America's biggest at 562,500 barrels a day, and Citgo's 156,000 barrel-a-day refinery in Corpus Christie, Texas.

Oil prices have fallen by about 23 percent since hitting an all-time trading high above $78 a barrel in mid-July. They haven't settled above $62 a barrel since Oct. 1, despite the Organization of Petroleum Exporting Countries' announcement in mid-October that it would reduce output by 1.2 million barrels a day.

Skepticism that OPEC members are committing to production cuts, as well as milder-than-normal U.S. temperatures this fall, have moderated prices.

In other Nymex trading, heating oil futures dropped 1.35 cent to $1.7196 a gallon, unleaded gasoline was down 1.82 cents at $1.6145 and natural gas futures fell 1.9 cents to $7.969 per 1,000 cubic feet.

Natural Gas prices pulled back on Tuesday, declining by 5% ahead of tomorrow's Natural Gas Inventory data. This 1 month chart of $NATGAS (Natural Gas Continuous Contract) shows the tremendous volatility of the market in recent weeks.

Due to the Thanksgiving holidays both Petroleum and Natural Gas Inventory Data will be released on Wednesday. Oil-Profits.Org will have both numbers immediately after they are released.

December natural gas fell 24.9 cents to $7.93 per million British thermal units Monday afternoon. "The short-term uptrend continues to meet solid resistance near $8.26," said Darin Newsom, a senior analyst at DTN.

January crude fell 55 cents to $58.42 a barrel. Oil-product prices were mixed with December heating oil down 1.49 cents at $1.654 a gallon and December unleaded gas up 0.89 cent at $1.55 a gallon.

Oil prices climbed Tuesday amid temporary trouble with an Alaskan pipeline and a couple of U.S. refinery outages.

Still, milder-than-normal U.S. temperatures and skepticism that OPEC members are committing to production cuts helped moderate the price increase.

Light sweet crude for January delivery rose 98 cents to $59.78 a barrel in late morning trading on the New York Mercantile Exchange.

On Friday, the December crude contract had closed at $55.81 a barrel, the lowest settlement for crude since June 15, 2005.

"The market is due for a bounce, and we're getting some of that," said Tom Bentz, a broker at BNP Paribas Commodity Futures in New York. "Throw in the Alaskan news, and here we go."

The Trans-Alaska Pipeline is flowing at 25 percent of its normal capacity due to high winds, the Alyeska Pipeline Service Co. said late Monday, according to Dow Jones Newswires. Also, there have been shutdowns at ExxonMobil Corp.'s refinery in Baytown, Texas, the country's biggest at 562,500 barrels a day, and Citgo's 156,000 barrel-a-day refinery in Corpus Christie, Texas.

However, analysts don't expect oil prices to jump too high, as doubts remain that OPEC members are reducing oil exports as planned. The Organization of Petroleum Exporting Countries, which is scheduled to meet in Nigeria on Dec. 14, announced an output cut of 1.2 million barrels a day last month. The cartel may make further cuts at its next meeting.

In an interview with Nigeria's This Day newspaper, OPEC President Edmund Daukoru acknowledged that some group members weren't complying with the cut, confirming market suspicions.

In other Nymex trading, heating oil futures rose 4.37 cents to $1.7145 a gallon, unleaded gasoline rose 4.32 cents at $1.5975 a gallon, and natural gas futures rose 3.7 cents to $8.056 per 1,000 cubic feet.

January Brent at London's ICE Futures exchange climbed 92 cents to $59.90 a barrel.

Traders were also positioning themselves ahead of the weekly U.S. oil inventory reports, to be released Wednesday. Analysts are expecting inventories of gasoline and distillates _ which include heating oil and diesel fuel _ to drop.

Because the New York Mercantile Exchange will be closed Thursday and Friday for the Thanksgiving holiday, trading has been light this week. With fewer players in the market, price swings are often larger than they would normally be.

This 7 month chart of $NATGAS (Natural Gas Continuous Contract) shows that the price of Natural Gas recently broke through over head resistance. This is a very bullish signal heading into the Winter heating season.

Crude-oil prices slid Monday as the market gauged OPEC nations' cohesion in oil cuts and noted ample winter supplies because of a so-far mild autumn.

An increase in supply from non-OPEC countries has also eased prices in the January contract that started trading Monday, said Victor Shum, energy analyst with Purvin & Gertz in Singapore.

Light sweet crude for January delivery was down 35 cents to $58.62 a barrel in electronic trading on the New York Mercantile Exchange near midday in Europe. January Brent at London's ICE Futures exchange was down 43 cents to $58.56 a barrel.

On Friday, the December light sweet crude contract closed at $55.81 a barrel. It was the lowest settlement for the front-month crude contract since June 15, 2005.

"The concern for the market is how real is the cutback in OPEC supply, the rising growth in supply from non-OPEC nations and the fact that winter weather in the northern hemisphere has not turned cold," Shum said.

"Going forward, I think weather will remain a wild card," he said. "Also, in less than a month's time, OPEC will meet again, and there is already talk of further cuts, which has underpinned prices."

The Organization of Petroleum Exporting Countries, which is scheduled to meet in Nigeria on Dec. 14, announced an output cut of 1.2 million barrels a day last month. But traders have been skeptical that the Vienna-based cartel will stick to its pledge at a time of historically high prices.

In other Nymex trading, heating oil futures dropped 0.12 cent to $1.6677 a gallon, while gasoline futures fell 1.11 cents to $1.5300 a gallon. Natural gas futures were down 19.5 cents to $7.984 per 1,000 cubic feet.

Oil company Chevron Corp. on Friday called off its planned acquisition of 122 retail gasoline stations in California owned by USA Petroleum Corp.

The deal was stopped "for business reasons," Chevron spokeswoman Stephanie Price said Friday, declining further comment.

San Ramon, Calif.-based Chevron, which last month reported a record quarterly profit of $5 billion, announced the deal in July and said then it planned to operate the stations under either the Chevron or Texaco brand.

Sen. Barbara Boxer, D-Calif., last month asked the Federal Trade Commission to "thoroughly review" Chevron's then-pending acquisition.

Boxer said the company and six other large refiners supplied about 90 percent of retail gas in the state, giving them "a significant effect" on prices in California due to their dominant market position.

Boxer's spokeswoman did not immediately return a call for comment Friday evening.

Thousand Oaks, Calif.-based USA Petroleum owns and operates retail gasoline stations primarily in California. Company representatives did not immediately return a call for comment.

Shares of Chevron gained 55 cents to end at $69.10 on the New York Stock Exchange.

Crude oil fell to a 17-month low in New York as warm weather in the northern U.S. reduced fuel consumption and on signs OPEC won't cut production as much as pledged.

The Organization of Petroleum Exporting Countries agreed to reduce output by 1.2 million barrels a day starting Nov. 1. Prices plunged yesterday after consultant Oil Movements said November OPEC shipments will rise. The U.S. Climate Prediction Center said yesterday the El Nino weather pattern will cause a mild winter in the northern third of the U.S.

``A lot of what's happening is technical, we broke through $57 and that created a lot of selling,'' said Adam Sieminski, chief energy economist at Deutsche Bank Securities AG in New York. ``There's a huge amount of skepticism about the level of OPEC output. There seems to be a game right now between OPEC and the trading community.''

Crude oil for December delivery fell 61 cents, or 1.1 percent, to $55.65 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Futures touched $54.86, the lowest since June 2005. The contract slumped $2.50 to $56.26 yesterday, the biggest one-day drop in 15 months. Prices, which plunged 6.6 percent this week, are down 1.2 percent from a year ago.

The December contract expires today. The more-active January contract fell 17 cents, or 0.3 percent, to $58.40 a barrel.

``There's always volatility when the contract expires,'' Sieminski said. ``You either have to sell it or take delivery. A lot of people obviously don't need deliveries next month.''

OPEC, which produces about 40 percent of the world's oil, will discuss production at its next meeting, which is scheduled for Dec. 14 in Abuja, Nigeria.

Home-Heating Demand

Home-heating demand in the Northeast, the region responsible for 80 percent of U.S. heating-oil use, will be 10 percent below normal through Nov. 24, said Weather Derivatives, a forecaster in Belton, Missouri.

``The decline is driven in large part by forecasts for mild weather,'' said Antoine Halff, a vice president and head of energy research at Fimat USA Inc. in New York. ``High distillate stocks in the U.S. are largely a legacy of the mild winter last year. I think this move lower will be short-lived because there have been a series of incredibly strong draws.''

Supplies of distillate fuel, including heating oil and diesel, fell 11 percent to 135 million barrels the past six weeks, according to an Energy Department report on Nov. 15. The declines left inventories last week 6.3 percent higher than the five-year average for this time of year, the department said.

Brent crude oil for January settlement fell 12 cents to $58.42 a barrel on the London-based ICE Futures exchange.

Oil and energy company Repsol YPF reported a drop of 8.5 percent in third-quarter net profit on Thursday, pressured by lower output.

Net profit for the third quarter came to euro869 million ($1.11 billion), compared to euro950 million in the same period the previous year.

Adjusted net profit, Repsol's preferred measure of profitability, fell more than 11 percent to euro844 million ($1.08 billion) in the third quarter, compared to euro951 million a year earlier. Adjusted net profit excludes payments to minority shareholders and non-recurring items.

Repsol's total output fell 2.5 percent in the third quarter to 1.128 million barrels of oil equivalent a day from 1.157 million in the same period a year earlier. The decline was mostly attributed to contract renegotiations in Venezuela as the nation enforced its demand for a majority share in operations by foreign companies.

Shares in the Spanish-Argentine company were down 1.16 percent to euro27.47 ($35.14) in Madrid. They have been volatile in recent months amid speculation on potential merger and acquisition activity.

In early October, Sacyr-Vallehermoso SA became the latest in a string of Spanish construction companies to jump into the country's energy sector, when it started buying Repsol shares in a friendly buildup to create a stable group of core local shareholders in the oil giant.

Sacyr currently owns 10.1 percent of Repsol and has another 7 percent through options contracts, positioning itself as Repsol's top shareholder above Catalan savings bank La Caixa.

Summary of Weekly Petroleum Data for the Week Ending November 10, 2006

U.S. crude oil refinery inputs averaged over 14.9 million barrels per day during
the week ending November 10, down 221,000 barrels per day from the previous
week's average. Refineries operated at 87.3 percent of their operable capacity
last week. Gasoline production decreased slightly last week compared to the
previous week, averaging nearly 8.7 million barrels per day, while distillate
fuel production remained relatively constant, averaging 4.0 million barrels per
day.

U.S. crude oil imports averaged nearly 9.5 million barrels per day last week,
down 337,000 from the previous week. Over the last four weeks, crude oil imports
have averaged 9.7 million barrels per day. Total motor gasoline imports
(including both finished gasoline and gasoline blending components) last week
averaged nearly 1.1 million barrels per day. Distillate fuel imports averaged
328,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) rose by 1.3 million barrels compared to the previous week.
At 336.0 million barrels, U.S. crude oil inventories remain well above the upper
end of the average range for this time of year. Total motor gasoline
inventories dropped by 3.7 million barrels last week, and are now in the lower
half of the average range. Distillate fuel inventories fell by 3.6 million
barrels, and are in the upper half of the average range for this time of year.
A very slight increase in high-sulfur distillate fuel (heating oil) inventories
was more than compensated by a significant decline in diesel fuel (both
ultra-low-sulfur and 15 ppm to 500 ppm sulfur) inventories. Total commercial
petroleum inventories declined by 9.0 million barrels last week, but remain
above the upper end of the average range for this time of year.

Total products supplied over the last four-week period has averaged over 21.3
million barrels per day, or 4.8 percent more than averaged over the same period
last year (when Hurricanes Katrina and Rita lowered demand levels). Over the
last four weeks, motor gasoline demand has averaged over 9.3 million barrels per
day, or 3.1 percent above the same period last year. Distillate fuel demand has
averaged nearly 4.5 million barrels per day over the last four weeks, or 9.5
percent above the same period last year. Jet fuel demand is up 4.1 percent over
the last four weeks compared to the same four-week period last year.

Oil prices edged up Wednesday as traders awaited the release of the weekly U.S. inventory report.

Mild weather in much of the Northern Hemisphere is dampening demand for heating oil and natural gas, however.

Light sweet crude for December delivery on the New York Mercantile Exchange rose 29 cents to $58.57 a barrel in electronic trading by midday in Europe.

On London's ICE Futures exchange, December Brent crude gained 30 cents to $59.14 a barrel. That contract expires later Wednesday.

After declining 25 percent from a summer peak above $78 a barrel, oil prices have hung close to the $60 level over the past month, even as the Organization of Petroleum Exporting Countries announced a 1.2 million barrel a day production cut and violence in Nigeria raised supply worries.

"For the first time in a while the market appears in a somewhat somnolent state: comfortable with current price levels and lulled by the lack of urgency from the geopolitical sphere," Mike Fitzpatrick, a vice president for energy risk management at Fimat USA, told Dow Jones Newswires.

Commodities analyst Mark Pervan, with Daiwa Securities in Melbourne, Australia, suggested the market was positioning ahead of the weekly U.S. inventories report, which comes out later Wednesday.

"Generally, most of the price catalysts for price taking are not active," Pervan said. "Instead we have mild winter weather in the United States, quiet in the Middle East and we're between OPEC meetings."

Vienna's PVM Oil Associates noted "the coming winter months could be milder than expected."

"According to the (U.S.) National Weather Service, heating oil consumption should be some 30 percent lower than average this week," PVM said. It added that "heating oil stocks in Germany, Europe's largest consumer, have been increasing markedly lately."

Last week showed declines in U.S. supplies of gasoline and diesel fuel, though oil and natural gas supplies are still ample _ above the average for this time of year.

Market participants are bracing for what could be another mixed report.

U.S. commercial crude inventories are expected to have risen by an average of 900,000 barrels in the week to Nov. 10, a Dow Jones survey of eight analysts showed.

Any bearish signal from this, however, is likely to be offset by a predicted 1 million-barrel drop in stocks of distillates, comprising diesel and heating oil.

In other Nymex trading, heating oil futures rose 0.48 cent to $1.66800 a gallon, and unleaded gas by more than a penny to $1.5570 a gallon. Natural gas futures were steady at $7.973 per 1,000 cubic feet.

Last week the International Energy Agency trimmed its outlook for 2006 global oil demand growth to 1.1 percent from 1.2 percent. The forecast for growth in demand for 2007 was maintained at 1.7 percent.

Oil held near $59 a barrel Tuesday after a two-day slide triggered in part by weaker-than-expected heating oil demand in the United States, the world's biggest consumer.

U.S. crude rose 8 cents to $58.66 a barrel after sliding $1.01 on Monday. London Brent crude was up 24 cents at $59.29.

Unseasonably mild temperatures in the U.S., the world's biggest heating oil market, are expected to leave demand about 16 percent below normal this week, the National Weather Service said.

U.S. heating oil stocks are nearly 7 percent above last year's level, and analysts polled by Reuters see distillate stocks - including heating oil - having fallen only 390,000 barrels last week in inventory data due Wednesday.

"Inventory levels are too high, with heating oil inventories ultra-high. But energy demand should pick up with winter," said Tony Nunan, manager at Mitsubishi Corp.'s risk management unit.

The International Energy Agency said Friday oil stocks in industrialized nations rose 1.15 million barrels per day (bpd) during the third quarter, the biggest rise since 1991.

Crude stocks in the U.S. are seen rising another 750,000 barrels in the week to Nov. 10, despite an agreement by OPEC to cut output 1.2 million bpd from November in an effort by the producers group to stem a 25 percent price slide since mid-July.

A Gulf source familiar with Saudi Arabia's policy told Reuters on Monday the world's top oil exporter will enforce its 380,000-bpd OPEC cut in full until the end of the year.

But refining sources told Reuters the kingdom will ship more to some customers next month in Asia, which takes nearly half its exports.

Since the beginning of October, U.S. and Brent crude have traded at $58 to $62 a barrel, with speculative hedge funds playing a part in keeping prices in this range.

They have sold when the price begins to break higher and bought as it nears the bottom of the six-week range, analysts and traders said.

The latest data from U.S. regulatory body the Commodity Futures Trading Commission showed speculators on the New York Mercantile Exchange cut net crude short positions in the week ended Nov. 7, taking their overall position to around neutral.

"This lack of commitment and a net position which is neutral should partly explain the flat price swings that we currently have," said Olivier Jakob, analyst at Petromatrix.

Oil is down nearly $20 from its mid-July peak of $78.40 and has recently been hovering near the bottom of a range of $57 to $62 that has held since early October.

High crude oil prices can wreck global economies, U.S. Energy Secretary Sam Bodman said on Monday.

"It is not an understatement to say ... that high oil prices can literally wreck economies," Bodman told a conference hosted by the Middle East Institute. Bodman did not specify whether current crude oil prices were too high.

High prices "can restrict development in a way that stifles business growth and, more notably, inhibits improvements in the health and well-being of so many around the world," Bodman said.

Russia's Finance Minister said Friday that oil giant BP PLC's Russian joint venture had paid out more than $1.1 billion in back taxes for 2002-2003, a news agency reported.

Finance Minister Alexei Kudrin said that most of the money would be transferred to the budget of the Tyumen region where the company is based, with a portion also going into federal coffers.

Earlier, the Vedomosti daily had reported that TNK-BP had transferred $1.5 billion to the budget, citing three unidentified sources close to the company.

Marina Dracheva, the TNK-BP spokeswoman, would not confirm how much had been paid. "This payment will not affect our financial results for this year, nor our investment plans for the future," she told The Associated Press.

TNK-BP has come under increasing pressure in recent weeks, with prosecutors alleging that the company has failed to fulfill the terms of its gas field licenses.

In a note to investors, Deutsche Bank said that the report of the back-tax payment added up to more bad news. "Some investors were still hoping for a material reduction in the back-tax claims," the note said.

The Energy Department said natural-gas inventories fell 7 billion cubic feet for the week ended Nov. 3, marking the second-weekly decline of the heating season.

Total stocks now stand at 3.445 trillion cubic feet, up 225 billion cubic feet from the year-ago level, and 246 billion cubic feet above the five-year average, the government data said. December natural gas rose 21.7 cents to $8.04 per million British thermal units.

Oil rose almost a dollar to more than $60 a barrel on Thursday, supported by OPEC supply cuts and a drop in fuel stockpiles in top oil consumer the United States.

OPEC is lowering output and some members have said the group may cut supply further in December. The cutback comes as oil demand is nearing its seasonal peak in the northern hemisphere winter.

"There is rising product demand, rising crude demand and OPEC is cutting output," said Mike Wittner, analyst at investment bank Calyon. "Global demand will get us back to mid-$60s crude by December."

U.S. crude was up 72 cents at $60.55 a barrel by 1244 GMT, adding to Wednesday's gain. London Brent rose $1.05 to $60.64.

Gulf members of OPEC said on Wednesday they were fully committed to the 1.2 million barrels per day (bpd) cut agreed from November, but said markets remained oversupplied for now.

Devon Energy Corp., the biggest independent oil and natural-gas producer in the U.S, said costs to double output at an Alberta oil-sands project may be about a third higher than the initial stage.

Adding daily output of 35,000 barrels a day by 2011 at its Jackfish project may cost C$600 million ($530 million) to C$750 million, the Oklahoma City-based company said in a filing with provincial regulators. The first phase cost about C$550 million, said Chris Seasons, president of Devon's Canadian unit.

``We are seeing some inflationary pressures for sure,'' Seasons, 46, said in a telephone interview. The new estimate is ``quite broad. Will it capture it? I hope so but I'm not 100 percent confident of that.''

Devon's increased estimate reflects rising labor costs as high prices spark a boom in projects to extract oil from Alberta's tar-like deposits, Seasons said. Spending of as much as C$125 billion by Devon and other companies will almost triple production from Alberta's oil-soaked sand to 3 million barrels a day by 2015, Canada's National Energy Board has said.

Once regulatory approval is granted and cost estimates are finalized, Devon will consider sanctioning the expansion in 2007, Seasons said yesterday. The project could be deferred if rising costs mean the project won't generate enough profit, he said.

The expansion's cost was pegged at $500 million in August 2005, according to Devon's Web site.

Each phase of Jackfish will develop recoverable reserves of more than 300 million barrels, he said. The project is located about 140 kilometers (87 miles) south of Fort McMurray, a northern Alberta city that is the hub of oil-sands developments.

Soaring Labor Costs

Another company building an oil-sands project in the region is Nexen Inc. Higher labor costs contributed to Nexen and partner Opti Canada Inc. last month raising the estimated cost of their project 10 percent to C$4.6 billion. The price tag has jumped 21 percent from a February forecast, Nexen said in October.

Royal Dutch Shell Plc's Canadian unit said in July costs for an 100,000-barrel-a-day expansion of an oil-sands project may reach C$12.8 billion, up from an August 2005 estimate of $7.3 billion and the original target of C$4 billion.

The oil-sands boom means companies supplying equipment and contractors to build the projects aren't reducing their fees even though oil and gas prices have fallen, said Steve Laut, president of Canadian Natural Resources Ltd.

Cost pressures on oil-sands projects near Fort McMurray ``are very, very high,'' he said yesterday at a press conference. ``Fort McMurray is like a world on its own, there is still a lot of activity.''

Calgary-based Canadian Natural estimates spending C$6.8 billion on the first phase of an oil-sands project scheduled to produce 110,000 barrels of oil a day by 2008.

Jackfish Output

The first phase of Devon's Jackfish is scheduled to begin production next year and reach capacity in 2008. Phase two aims to start construction in 2008 and production in 2010, according to an application submitted to Alberta energy regulator.

The two phases of Jackfish are expected to produce oil for several decades, according to the filing.

Devon's daily output is equivalent to about 600,000 barrels of oil. Alberta's tar-like deposits represent ``a significant piece of our long-term strategy for the company,'' Seasons said.

Devon is the largest U.S. oil and gas producer among companies that don't own refineries or chemicals plants.

Oil prices slid below $59 a barrel Tuesday as traders focused on a coming snapshot of U.S. supplies that will likely show modest increases in crude and gasoline inventories.

Light, sweet crude for December delivery dropped $1.09, to settle at $58.93 a barrel, on the New York Mercantile Exchange. Prices had gained 88 cents in Monday's trading after armed protesters shut down a Nigerian oil pumping station.

"Traders are still looking for clues for clear direction," said Ken Hasegawa, an analyst with Himawari CX in Tokyo.

The long-term outlook, however, appeared bullish, with the International Energy Agency saying that governments around the globe must substantially increase their investment in the infrastructure that carries energy supplies to prevent a global shortage by 2030.

In its 2006 World Energy Outlook, the IEA said global energy needs will surge 53 percent by 2030. More than 70 percent of that increase is seen coming from developing countries, led by China and India.

Oil prices have retreated sharply from a summertime high above $78 a barrel, trading in a range of about $57 to $61 a barrel over the past month as traders weigh the latest weather and economic forecasts against OPEC's plans to curb supplies by 1.2 million barrels a day.

Some members of the Organization of the Petroleum Exporting Countries are concerned that prices have already fallen too far from their July peak.

OPEC President Edmund Daukoru, also Nigeria's oil minister, said the oil cartel might need to further cut its output, but that it doesn't have a specific price floor or band that it wants to defend.

"OPEC doesn't have a rigid floor," Daukoru told reporters Tuesday during a visit to South Korea. Setting a target price band "is not really applicable to the fluid, free market."

Daukoru described the current price of oil as "low." OPEC's next meeting is scheduled for December.

"One cut really didn't do much to buoy the market," said Tom Hartmann, commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, Calif. "We're still fighting large supply issues," and mild weather in the U.S. will also limit heating demand, he said.

Meanwhile, in Nigeria, an American and a Briton kidnapped from a ship mapping petroleum deposits off the nation's oil-rich southern coast were released Tuesday, government and company officials said. The two men taken hostage Thursday were employed by a Norwegian firm working with Chevron Corp.

Last week's report on U.S. energy supplies showed that crude oil inventories rose by 2 million barrels, to 334.3 million. Demand is currently low because the cold winter season in the Northern Hemisphere has yet to set in.

Vienna's PVM Oil Associates predicted that Wednesday's U.S. inventory figures will "show a modest increase of crude stocks by 290,000 barrels, due to healthy import figures."

In other Nymex trading Tuesday, heating oil futures fell by 3.81 cents, to settle at $1.6803 a gallon, unleaded gasoline futures fell a half-cent, to settle at $1.5241 a gallon, and natural gas futures jumped 26.5 cents, to settle at $7.755 per 1,000 cubic feet.

Total said the Joslyn Project, a major venture to extract up to 2 bln barrels of heavy oil in Canada, has entered the production phase.

Deer Creek Energy, a Canadian firm that Total acquired last year for more than 1.2 bln usd, has an 84 pct stake in the project.

The oil is in the form of bitumen located in the giant Athabasca oil sands deposits in Alberta.

Output will initially be raised to a plateau of 10,000 barrels per day, and permission is being sought from Canadian authorities to raise production to 100,000 bpd.

Total expects the Joslyn Project and other heavy oil projects it is developing in Canada to produce a combined 300,000 bpd within 10 years.

Marathon Oil Corp. said Monday it is considering a Canadian oil sands venture, while also announcing it awarded a front-end engineering and design contract to Fluor Corp. for a project at its Detroit refinery.

In a statement, Chief Executive and President Clarence P. Cazalot said Marathon has been in discussions with several players in the Canadian oil sands sector, and the company is looking for potential upstream operators for the project.

It plans to issue a request for proposals, under which Marathon would provide heavy Canadian oil sands crude oil processing capacity in exchange for an ownership stake in the project.

The Fluor contract is for a proposed heavy oil upgrading project at Marathon's 100,000 barrel-per-day Detroit refinery. Financial terms were not disclosed.

Marathon said it is also conducting a feasibility study for a similar project at its 222,000 barrel-per-day Catlettsburg, Ky., refinery.

Marathon shares fell 1 cent to $88.50 in morning trading on the New York Stock Exchange.

Oil prices slipped below $59 on Monday as high fuel stocks in consumer countries blunted the impact of a new attack on Nigerian oil facilities.

Doubts over OPEC's determination to push through output cuts also weighed. Investors took little notice of OPEC President Edmund Daukoru saying more reductions could follow in December.

U.S. crude was down 16 cents at $58.98 a barrel by 1132 GMT. Prices ended $1.26 higher on Friday after the U.S. consulate in Nigeria said militants may have imminent plans to launch attacks on oil facilities in the Niger Delta.

London Brent crude was 10 cents down at $59.05.

The market has traded between $57-$62 for a month.

OPEC President Edmund Daukoru warned on Sunday that the cartel may have to cut oil production again next month because the market was still "soft."

While many other OPEC members have also said a further reduction may be in order at its December meeting, Daukoru's comments are the latest to signal that the cartel may not be satisfied until it sees prices once again above $60 a barrel.

"$60 will not hurt the world economy," Daukoru, who is also the minister of petroleum in Nigeria, told Reuters as he arrived in South Korea for an oil and gas conference.

OPEC cut output from November 1 -- its first formal curbs since 2004 -- to halt a slump in prices, which tumbled from a mid-July U.S. record of $78.40 to less than $57 two weeks ago.

Despite the cuts, however, prices remain below $60 a barrel, in part due to doubts over compliance from many members, including Nigeria. U.S. light sweet crude closed at $59.14 a barrel on Friday.

Daukoru said all OPEC members must and will fully implement the 1.2 million barrel-per-day output cut agreed to last month in Doha, and Nigeria alone will cut 100,000 bpd, which would push daily production down to 2.1 million barrels.

But oil traders said Nigeria would actually raise exports in December by 50,000 b

ATP Oil & Gas Corp., an oil and gas development and production company, reported Friday a third-quarter profit, reversing a year-ago loss, as the company raised output and realized higher prices for crude oil and natural gas.

For the quarter ended Sept. 30, the company reported net income of $1.2 million, or 4 cents per share, versus a prior-year loss of $10.6 million, or 36 cents per share. Excluding an impairment charge from acquired properties, ATP reported profit of $12.9 million, or 43 cents per share.

The company, which operates in the Gulf of Mexico and the North Sea, said revenue rose to $132.8 million from $26.3 million in the year earlier period.

Wall Street had forecast a profit of 44 cents per share, the average estimate of 10 analysts surveyed by Thomson Financial, on projected sales of $125.3 million.

ATP said it placed on production six new wells in the first nine months of 2006, and that nine more wells are scheduled for first production between now and mid-2007. New wells scheduled in the next nine months are expected to continue increasing production into 2007.

Oil prices extended their recent decline Thursday as the market focused on a climb in U.S. crude oil inventories.

Light sweet crude for December delivery on the New York Mercantile Exchange fell 41 cents to $58.30 a barrel in electronic trading by midday in Europe. December Brent crude futures on London's ICE Futures exchange dropped 32 cents to $58.66 a barrel.

The focus now is on the market's resilience at current prices and whether key support levels will be broken.

"For technicians, the trading range battle lines are being drawn and it seems that the $57 a barrel area is very critical," said Phil Flynn at Alaron Trading Corp. in Chicago in a report.

According to the U.S. Energy Information Administration's weekly report Wednesday, U.S. crude oil inventories rose by 2 million barrels to 334.3 million barrels in the last week.

That was largely due to crude imports bouncing back up by 599,000 barrels per day from the previous week, when imports dropped off significantly.

Inventories of distillates, which include heating oil and diesel fuel, fell by 2.7 million barrels to 141.3 million barrels. Gasoline inventories fell by 2.8 million barrels to 204.6 million barrels. Furthermore, the EIA said demand for these products has recently accelerated.

The drops in product inventories were larger than anticipated, but the market wasn't too rattled, given that the report indicated that refiners are boosting production and fuel demand is still going strong.

"U.S. inventory figures initially appeared to be bullish due to higher-than-expected draws of distillates and gasoline, but eventually higher refinery runs stopped the uptrend," said Vienna's PVM Oil Associates. "The latest supply news are also mixed with lower output figures coming from Russia but higher export number from Brazil."

Heating oil futures fell half a cent to $1.6460 a gallon, while unleaded gasoline edged higher to $1.4645 a gallon. Natural gas futures dropped 5 cents to $7.660 per 1,000 cubic feet.

Valero Energy Corp., the nation's largest independent oil refiner, on Tuesday posted an 86 percent rise in its third-quarter profit on higher sales, a one-time gain and roughly flat expenses.

After paying preferred dividends, net income surged to $1.6 billion, or $2.55 per share, for the July-September period from $858 million, or $1.47 per share, in the year-earlier quarter.

Valero noted that the recent quarter includes a $132 million pretax gain on the July sale of its 41 percent stake in Valero GP Holdings. Valero GP holds the general partner interest in energy pipeline operator Valero LP. The year-ago quarter includes a $621 million pretax charge related to last-in, first-out accounting.

Excluding those items, earnings totaled $1.5 billion, or $2.42 per share, compared with $1.3 billion, or $2.19 per share, in the 2005 third quarter. Analysts polled by Thomson Financial forecast earnings of $2.30 per share, excluding one-time items.

Operating revenue rose 4 percent to $24.32 billion from $23.28 billion a year ago. Total costs and expenses held roughly flat at $21.99 billion versus $21.97 billion a year earlier.

"The strong sour crude oil discounts, coupled with more reliable plant operations and outstanding U.S. marketing margins, allowed us to capture more of the margin as compared to last quarter," said Chief Executive Bill Klesse, in a statement.

Margins came down slightly from the prior year, however.

Valero's shares rose 12 cents to close at $52.26 on the New York Stock Exchange.

In the first nine months of the year, Valero earned $4.3 billion, or $6.83 per share, compared to $2.2 billion, or $3.96 per share, in the same period in 2005. Revenue rose to $72.04 billion from $56.27 billion a year ago.

The company said in a conference call Tuesday that this third quarter was the best in its history and largely attributed it to higher volumes.

The company also predicted a strong fourth quarter, saying that planned turnaround activity is moderate, with equipment modification and reliability upgrades at its Houston refinery due to be completed by late November. Turnaround activity also took place at the St. Charles, La., refinery.

The turnaround activity has reduced crude volume by an average of 275,000 barrels per day in October, the company said.

Valero plans to bring online by the end of the year an expansion at its Port Arthur, Texas, refinery, increasing crude capacity there to 325,000 barrels per day, the company said Tuesday.

Valero operates 18 refineries in the U.S., Canada and the Caribbean.

Analysts expect earnings per share of $1.42 in the fourth quarter and $8.05 per share for the full year.

"The company's outlook for the balance of the year and next year is certainly consistent with industry expectations given tight supply demand balances and limited new refining capacity coming online," said Ann Kohler, an energy analyst with Caris & Company.

Kohler said that 2006 has been a particularly heavy turnaround year for refiners in general because they put off maintenance scheduled for 2005 due to Hurricane Katrina.

"It'll be a lighter maintenance turnaround season than what we saw this year," Kohler said of 2007. "That's beneficial from the standpoint of view that Valero will have higher utilization and higher volumes."

Valero said Tuesday it expects turnaround activity in 2007 to be lower than average.

Independent oil and gas explorer Devon Energy Corp. on Wednesday said its third-quarter earnings fell 5 percent, due mostly to lower natural gas prices and greater operating expenses.

Quarterly earnings after paying preferred dividends decreased to $703 million, or $1.57 per share, from $742 million, or $1.63 per share, during the same period last year.

Excluding special items totaling $38 million, or 9 cents per share, related to the use of derivatives and a reduction in the carrying value of oil and gas properties, the company earned $1.66 per share, in the latest period.

Analysts polled by Thomson Financial forecast a profit of $1.52 per share. Thomson estimates usually exclude special items.

Revenue grew less than 1 percent to $2.72 billion from $2.7 billion during the same period a year ago, but came in above analysts' estimate of $2.65 billion.

The company said its realized price for natural gas shrank 21 percent to $5.62 per thousand cubic feet in the quarter, compared woth $7.13 per thousand cubic feet in the year-ago period. Devon Energy said it also incurred higher operating expenses, such as higher oil field service and supply costs, lease operating expenses, higher production taxes and greater labor costs.

Devon Energy drilled 740 wells in the period, with 731 successful. Combined oil, gas and natural gas production in the quarter averaged 602,000 oil equivalent barrels per day, an increase of 1 percent versus last year.