Oil Boom Profits

Oil steadied above $62 on Friday, supported by signals that some OPEC producers may trim output to stem a price decline caused by ample U.S. inventories.

U.S. crude shed 25 cents to $62.51 a barrel by 1000 GMT, deepening losses of 20 cents the previous session. London Brent crude lost 49 cents to $62.05.

"There is obviously enough oil flowing in the market. The inventories are at a very comfortable level and capacity has come back a notch, so the judgment is that there is more than enough supply," said Tobin Gorey at the Commonwealth Bank of Australia.

The world's eighth largest exporter Nigeria will cut supplies by 5 percent from October 1 after consultations with other OPEC producers, while some other countries in the exporters' club have already trimmed sales, acting Secretary-General Mohammed Barkindo told Reuters on Thursday.

A senior Nigerian oil industry source told Reuters that Nigeria was joining Saudi Arabia, the world's biggest oil exporter, and Kuwait in an unofficial deal to pare oil supply.

A Gulf oil source said Kuwait's oil production was steady and there had been no order yet to cut supply. Saudi oil officials could not be reached for immediate comment.

Edmund Daukoru, OPEC's president, told Reuters earlier this week that something needed to be done to steady prices, but Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah countered that with U.S. crude above $61, most OPEC ministers were content with prices and not inclined now to cut output.

Oil in New York has lost about 20 percent from a July peak of $78.40, the steepest drop since the 1991 Gulf War.

Although some OPEC members have been signaling that the cartel will trim output, the market has been dominated by a string of bearish data, limiting the impact of OPEC's rumblings.

NYMEX gasoline for October led oil complex losses on Thursday, falling 3.88 cents or 2.5 percent after U.S. government data showed a bigger-than-forecast build in gasoline stocks a day earlier.

ECONOMIC WORRY

The recent spate of weak economic data has also begun to sow doubts about the sustainability of U.S. economic growth in late 2006 and early 2007.

Official data on Thursday showed that U.S. economic growth has decelerated more sharply than expected in the second quarter. The world's largest economy grew at a revised 2.6 percent annual rate in the second quarter, slower than the 2.9 percent forecast a month earlier and about half of first quarter's 5.6 percent clip.

The political limbo over the nuclear ambitions of Iran, the world's fourth largest oil exporter, has also added pressure to oil prices, analysts say.

European Union foreign policy chief Javier Solana said on Thursday he had failed to reach a deal with Iran's chief nuclear negotiator on Tehran's atomic plans, but they had paved the way for further talks.

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The Energy Department said natural-gas inventories rose 77 billion cubic feet for the week ended Sept. 22. Analysts at Strategic Energy & Economic Research expected an increase of 86 billion. Total stocks now stand at 3.254 trillion cubic feet, up 377 billion cubic feet from the year-ago level, and 354 billion cubic feet above the five-year average, the government data said. November natural gas shed 8.9 cents, or 1.2%, to $5.58 per million British thermal units

Oil prices hovered at a seven-day high of just under 63 U.S. dollars a barrel Thursday following nearly two dollars jump overnight amid concerns OPEC will cut production to support prices.

Wednesday's surge came after the U.S. Energy Department's weekly data showed higher-than-expected increases in gasoline and distillate inventories.

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Light, sweet crude for November delivery fell 19 cents to 62.77 dollars a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe.

The contract settled Wednesday at 62.96 dollars on the New York Mercantile Exchange, a gain of 1.95 dollars for the day, and the price peaked at 63.21 dollars during Thursday's early trading.

November Brent crude on London's ICE Futures exchange rose 32 cents to 62.53 dollars a barrel.

A weekly U.S. Energy Department petroleum supply snapshot showed Wednesday U.S. inventories of crude oil fell by 100,000 barrels to 324.8 million barrels, or 5 percent more than last year.

The Energy Information Administration, the department's statistical arm, said domestic inventories of gasoline increased by 6.3 million barrels last week to 213.9 million barrels, or 9 percent above year ago levels.

Speculation OPEC might trim output helped bolster prices, although officials say OPEC has no plan yet to meet before its next scheduled conference in December.

Some analysts say the glut in U.S. inventories, along with a forecast warmer-than-usual winter, could push oil prices below 60 dollars in the next two months.

Chesapeake Energy Corp. on Wednesday said it will shut-in a portion of its unhedged near-term natural gas production due to low wellhead natural gas prices.

Effective Oct. 1, Chesapeake will temporarily shut-in about 100 million cubic feet per day of net natural gas production (about 125-150 mmcf per day gross), or about 6 percent of the company's net oil and natural gas production, in various areas of operations in the southwestern U.S. until natural gas prices recover from the recent low levels.

The company said it will bring these unhedged natural gas production volumes back on stream as the prices improve. It is likely to reduce its 2006 fourth-quarter production forecast range, it added.

Natural-gas futures in New York fell to their lowest in almost four years as mild weather cut demand and brimming inventories pared the need for fresh purchases.

U.S. supplies probably rose 85 billion cubic feet last week, the median estimate of 19 analysts surveyed by Bloomberg. That would lift stored reserves to 3.26 trillion, more than the highest level reached last year, with seven weeks left until the Nov. 1 end of the refill season. The Energy Department releases its weekly gas-storage report tomorrow.

``Considering where we are with supply, it's going to be difficult for prices to come off this level,'' said Brad Florer, a trader with Kottke Associates in Louisville, Kentucky. ``There's no weather out there and there haven't been any severe storms this hurricane season.''

Gas for October delivery fell 29.6 cents, or 6.5 percent, to $4.23 per million British thermal units at 12:54 a.m. on the New York Mercantile Exchange. The contract touched $4.08 earlier today, the lowest price for a contract closest to expiration since Nov. 18, 2002.

November gas dropped 20.1 cents, or 3.5 percent, to $5.604 per million Btu. November becomes the front-month contract after October expires at the close of floor trading today.

Temperatures in the Midwest will be about 8 degrees Fahrenheit (5 Celsius) below normal Sept. 29 through Oct. 2, according to MDA Federal's EarthSat Energy forecaster. U.S. heating demand in the West will be on average 2 percent below normal through Oct. 4 on above-normal temperatures, researcher Weather Derivatives said.

Amaranth Pressure

The collapse of Amaranth Advisors LLC's natural-gas trades that led to $6 billion in losses may be pushing prices down as some traders bet against institutions that still hold large gas positions, said Charlie Sanchez, energy markets manager for Gelber & Associates in Houston.

``There's a lot of selling pressure against the news on Amaranth, people think they can squeeze out anyone who is stuck in the market,'' Sanchez said. ``Once October comes off the board, some of the institutions may come out of the market.''

Amaranth, based in Greenwich, Connecticut, last week sold its energy trades and other investments to avoid being shut down by creditors after its two main funds plunged 65 percent since the end of August. The firm has been in talks to sell a stake to Citigroup Inc., the largest U.S. bank, which wants to expand its hedge-fund business. It's the largest hedge fund to be crippled by bad bets since Long-Term Capital Management LP in 1998.

Industrial Demand

Orders placed with U.S. factories for durable goods unexpectedly dropped in August after falling in July, a Commerce Department report today showed. The 0.5 percent decline in orders followed a 2.7 percent drop in July, making the first back-to- back drop since April-May 2004.

Slowing factory demand can also decrease demand for gas, which supplies 32 percent of the energy used to run U.S. industrial plants, according to the Energy Department. The decrease in orders is bearish for growth, Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina, said in a note.

``Durable goods orders are indicative of business investment and industrial growth in the pipeline for a number of months to come,'' Schenker wrote. ``A significant slump in August supports our GDP forecasts for below-trend growth in coming quarters.''

Oil prices plunged Wednesday and headed toward the $60 a barrel mark after the government said supplies of crude oil fell far less than expected while gasoline stocks surged.

U.S. light crude for October delivery lost 51 cents to $60.50 a barrel on the New York Mercantile Exchange, having traded as low as $60.10. Oil traded up 60 cents just prior to the report's release.

In its weekly inventory report, the Energy Information Administration said crude stocks slipped by 100,000 barrels last week. Analysts were looking for a decline of 1.7 million barrels, according to Reuters.

Gasoline supplies swelled by 6.3 million barrels, while distillates, used to make heating oil and diesel fuel, rose by 2.6 million barrels. Analysts were looking for a 500,000 barrel increase in gasoline supplies and a 2.3 million barrel build in distillates.

EIA attributed the surprisingly strong build in gasoline supplies to higher imports and strong production at U.S. refineries.

The agency said gasoline supplies are now above average for this time of year, while crude and distillate stocks are "well above average."

Oil prices have stabilized, trading around $60 a barrel for the past few days, after a steep drop in price over the last couple of weeks prompted murmurings from OPEC and industry analysts that the cartel may soon cut production.

The cartel, which controls over one-third of the world's crude output, left production running at full tilt at its last meeting Sept. 11. But at that point crude prices had already fallen by over $10, and ministers agreed to leave open the possibility of a snap decision to cut production even before the group's next regularly scheduled meeting, which is set for Dec. 14 in Nigeria.

And OPEC official told Reuters Wednesday that ministers are consulting over oil's recent price slide, but they have not yet decided whether to hold an emergency meeting.

Edmund Daukoru, president of the Organization of the Petroleum Exporting Countries, on Tuesday told Reuters "something must be done" to steady the market and that the group was already talking about the price drop.

Asked whether OPEC would cut production at its December meeting, Daukoru said: "Something needs to be done to steady the price. That's all I can say."

Some in OPEC see no need to act yet. Kuwait's oil minister told Reuters OPEC was not inclined to cut its production now. A Libyan official told the news agency he was not very worried about a sharp price drop.

"Prices are still at good levels," Kuwait's Energy Minister Sheikh Ali al-Jarrah al-Sabah told Dubai-based Al Arabiya television, according to Reuters. Matters would be left for the next OPEC meeting, he said.

Crude has fallen over 23 percent from a record trading high of $78.40 in July, selling off rapidly over the last couple of weeks.

Several factors have contributed to oil's slide, including the end of the summer driving season in the U.S., an easing of tensions in the Middle East, brimming stockpiles, predictions for a warm winter, an as-yet mild hurricane season, and the withdrawal of some speculative investment money from the market.

Oil prices are now slightly lower for the year, although they remain more than three times higher than at the beginning of 2002.

How much further prices will fall is a mater of debate. Some argue a slowing economy in the U.S., combined with the cyclical nature of the commodity business, mean oil prices could fall into the $40s.

Others point to still-growing worldwide demand, production levels that remain tight, and these OPEC remarks as evidence that crude is unlikely to fall much below $60 a barrel anytime soon.

OPEC ministers are consulting over oil's 20 percent price fall since mid July but have no plans as yet to call an emergency meeting, an OPEC official said on Wednesday.

The steepest drop in oil prices in 15 years -- from $78.40 a barrel for U.S. oil in mid-July to below $60 earlier this week -- prompted OPEC's President Edmund Daukoru to tell Reuters on Tuesday "something needs to be done to steady the price".

OPEC last met on September 11, when oil was around $66, and decided to leave its output ceiling at 28 million barrels per day until the next scheduled meeting on December 14. But oil's continued slide is causing alarm in some OPEC states.

"Consultations are ongoing, but there has not been a decision to hold an emergency meeting as of yet," the OPEC official told Reuters.

Gulf sources said any emergency meeting of the Organization of the Petroleum Exporting Countries was unlikely before the Muslim fasting month of Ramadan ends in late October.

When the time does come for OPEC to cut output, the focus will be on Saudi Arabia, the world's top oil exporter, and other Gulf OPEC producers Kuwait and the United Arab Emirates.

But these countries appear in no rush to act.

Kuwaiti Oil Minister Sheikh Ali al-Jarrah al-Sabah said on Tuesday most OPEC ministers were content with current prices and he did not believe OPEC was inclined to reduce output now.

"Now, there is no inclination to make any amendment," he told Al Arabiya television.

That view was echoed on Tuesday by oil officials in Qatar and Libya.

OPEC has carefully avoided setting a target price for oil, but some individual ministers have indicated a comfort level.

Iran has said it wants the price for OPEC's basket of crudes to hold above $60 -- around $65 a barrel for U.S. crude.

OPEC President Edmund Daukoru told Reuters on Tuesday that global oil supply was expected to be a "colossal" 1.8 million bpd above demand by the second quarter of 2007 and that "something needs to be done to steady the price".

As a group OPEC has been producing below its 28 million barrels per day ceiling all year.

But Saudi Arabia, Kuwait and the UAE have been pumping well beyond their allocated limits to make up for those struggling to meet theirs, such as Venezuela and Indonesia.

Oil held above $61 on Wednesday as dealers balanced an expected swelling in robust U.S. winter fuel inventories against a warning from producer cartel OPEC that it may take action to stabilise tumbling prices.

U.S. crude rose 27 cents to $61.28 per barrel at 0337 GMT, but easing from Monday's high of $62. London Brent edged up by 20 cents to $60.32.

"It is difficult to push prices up when the fundamentals show that there are ample stocks," said Tobin Gorey, a commodities analyst at Commonwealth Bank of Australia.

A Reuters poll ahead of Wednesday's U.S. government data found that U.S. stocks of distillates, which include heating fuel, were projected to have risen by 2.3 million barrels last week. Inventories already stand at their highest level since January 1999.

Crude oil supplies were forecast to have declined by 1.7 million barrels last week, while gasoline stocks rose by 500,000 barrels, the survey showed.

The bulging fuel stocks, easing U.S. economic growth and diminishing political tensions over Iran's nuclear stand-off have sent oil prices diving about 20 percent from July's peak of $78.40 a barrel, their steepest drop since the Gulf War in 1991.

"OPEC's comments have not triggered a spike in prices because many in the market expect the group to cut supplies only when U.S. crude falls below $60," Gorey added.

The Organization of the Petroleum Exporting Countries (OPEC), which pumps a third of the world's oil, said on Tuesday that lower oil prices could harm investment in the industry.

"We are already talking among ourselves in the OPEC fold. The price is very low, and it's not good for investors," OPEC President Edmund Daukoru told Reuters on Tuesday.

Asked whether OPEC would cut production at its next ministerial meeting in December, Daukoru said: "Something needs to be done to steady the price. That's all I can say."

Oil prices, which touched a six-month low on Monday, rose to a high of $62 on Daukoru's comments but then eased back.

Saudi oil minister Ali al-Naimi, who steers the policy of the world's biggest exporter, said last week, when prices were above $62 a barrel, that prices were "reasonable."

BEARISH MARKET

Some analysts say that the glut in U.S. inventories, along with a forecast warmer-than-usual winter, could push oil prices below $60 in the next two months.

"Everyone is looking for the window to take a long position but no one has any confidence that prices have already hit the bottom," said Ken Hasegawa, a manager at Himiwari CX, Japan's largest commodities futures broker.

Adding downward pressure to prices, BP said it was increasing production at its Prudhoe Bay oilfield in Alaska and was on track to hit 400,000 barrels per day of production by the weekend.

Oil rose toward $62 a barrel as producer group Opec kindled fears of production cuts, saying oil's steep slide from record peaks had brought prices too low.

US crude rose 41c at $61.86 a barrel, bringing the price well above yesterday's six-month low below $60. London Brent rose 16c to $60.96.

The rebound came after Edmund Daukoru, the Opec president, said the slide in prices was harming investment and that "something needs to be done."

He said in Abuja, Nigeria, that members of the exporters' cartel, which pumps a third of the world's oil, were already talking internally about the price fall.

Opec expects the global oil supply to be a "colossal" 1.8 million barrels per day above demand by the second quarter of next year, he added. Opec sources have said the group has no plans to call an emergency meeting ahead of its scheduled December 14 meeting in Nigeria.

Oil held above $61 on Tuesday after rebounding from a six-month low as dealers focused on whether OPEC might trim output should prices fall further.

U.S. crude eased 31 cents at $61.14 a barrel by 1240 GMT, while London Brent slipped 547 cents to $60.26 a barrel.

Oil prices rebounded on Monday, settling up 90 cents, after the market briefly slipped below the psychologically important $60 level earlier in the session.

"The general sentiment is that if prices fall further, OPEC might decide to come in and cut its quota," said Andrew Harrington, an industry analyst at ANZ.

"Given the language that some OPEC members are using, the market is interpreting that a price below $60 would be a trigger point for the group to act," he added.

The Organization of the Petroleum Exporting Countries, which pumps more than a third of the world's oil, is concerned about a drop in oil prices but has no plans to call an emergency meeting ahead of its scheduled December 14 meeting in Nigeria, OPEC sources said on Monday.

U.S. crude has tumbled around 20 percent since its $78.40-peak in mid-July, taking back virtually all of this year's gains.

OPEC has avoided setting a target oil price to defend. Saudi Oil Minister Ali al-Naimi, who steers the policy of the world's biggest exporter, said last week that prices were "reasonable."

Saudi Arabia's Monetary Authority Vice Governor Muhammad Al-Jasser added on Tuesday that oil prices at $60 remained "very healthy."

But Iran's Oil Minister Kazem Vaziri-Hameneh has said he does not want to see the price for OPEC's basket of crude grades drop below $60, which equates to U.S. crude at roughly $65.

Fears of a sharp slowdown in the world's largest economy also eased following a smaller-than-expected decline in U.S. August home sales data.

U.S. home sales slipped 0.5 percent to an annual rate of 6.30 million units, the smallest in the last five months of declines, which economists read as the end of the slump for the sector.

Oil prices inched higher in Asian trading Tuesday after an overnight rally lifted crude futures by almost US$1 a barrel on worries that the recent drop in prices could prompt OPEC to cut production.

Light sweet crude for November delivery on the New York Mercantile Exchange rose 14 cents to US$61.59 a barrel in electronic trading on the New York Mercantile Exchange, midmorning in Singapore. The contract on Monday gained 90 cents to settle at US$61.45 a barrel.

The Organization of Petroleum Exporting Countries recently reduced its demand forecast for the remainder of the year, citing weakening demand in the U.S., among other factors. However, some cartel members have insinuated that oil prices below US$60 could prompt a production cut.

Also supporting oil prices were expectations that Wednesday's midweek U.S. petroleum supply snapshot would show domestic crude stocks declined in the week ended Sept. 22.

Crude inventories were expected to fall by 1.92 million barrels, according to a Dow Jones Newswires poll of analysts.

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Distillate stockpiles, which include heating oil and jet fuel, were expected to gain 2 million barrels, the poll showed. The Energy Information Administration, the U.S. Energy Department's statistical arm, was to release the data Wednesday.

Oil prices are down 21 percent since hitting a record of US$78.40 on July 14.

Heating oil futures rose 0.71 cent to US$1.6635 a gallon (3.8 liters) while gasoline prices rose 0.99 cent to US$1.51 a gallon.

Nymex natural gas futures rebounded from a three-year-low settlement to rise 3.5 cents to US$4.51 per 1,000 cubic feet Tuesday. The contract slid 15.2 cents Monday amid record U.S. supplies to settle at US$4.475 per 1,000 cubic feet _ the lowest close since Sept. 26, 2003.

Oil rebounded above $62 on Monday, after briefly sliding to a six-month low, on abundant supplies in top consumer the United States and fears that slower U.S. economic growth would stunt fuel demand.

U.S. crude was trading up $1.50 at $61.55 a barrel by 1742 GMT on short-covering, after oil slid as low as $59.52 in early trade. It traded as high as $62.15.

London Brent rose 97 cents to $61.38 a barrel.

"The rally started on buying by a European bank and the locals got caught short, which in turn set off stops," said Nauman Barakat, oil analyst at Macquarie Inc. "There's no news as such to set this buying off."

U.S. crude had fallen nearly $19 from its mid-July peak of $78.40, its biggest slide in more than 15 years. The 24 percent decline was set off as investors' concern faded over Iran and the Atlantic hurricane season proved unexpectedly mild.

The rout deepened last week as speculators fretted over slowing economic growth in the world's top consumer and hedge fund Amaranth Advisors registered billions of dollars in losses on natural gas positions.

"You have summer support unwinding, very bad product market support and, on top of that, the U.S. economic slowdown is becoming more compelling," said Eoin O'Callaghan of BNP Paribas.

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BP Plc's move to restore output at its Alaskan oil field earlier than expected added to a sense of healthy supply.

The British company said on Friday it would add 150,000 barrels per day of output to its Prudhoe Bay field in about a week, lifting total production to 400,000 bpd, less than two months after it was forced to halve flows due to a corroded pipeline.

Oil prices have been under pressure as U.S. inventories of distillates climb to their highest level in nearly eight years and natural gas stocks swell to record-high levels, assuring consumers of ample winter fuel supplies.

At the same time, investors have begun to fret over the pace of U.S. economic growth -- a worry heightened last week after a key business activity index turned negative for the first time since April 2003, indicating a decline in manufacturing.

DESIRABLE PRICE LEVEL

But Goldman Sachs cautioned that the market's weakness may be fleeting, as a severe winter could eat into comfortable stocks while delays in bringing online new oil fields and refineries may put renewed strain on global capacity by the end of this year.

Even those who say the market may struggle to rebound warn that further losses are likely to be checked soon by members of the Organization of the Petroleum Exporting Countries, many of whom say $50 to $60 is a desirable price level.

While OPEC was concerned by the sharp drop in prices, it had no plans to hold an emergency meeting.

"It's too early at the moment, but we are monitoring it," an OPEC source said when asked if the cartel needed to meet ahead of a scheduled meeting in December.

Saudi Oil Minister Ali al-Naimi said last week that oil prices were "reasonable" -- a shift from calling prices "high" that some analysts read as a signal for potential output action.

"OPEC has a very difficult decision to make because, if they try to maintain a price support to high, then they will exacerbate the downturn for the world next year that we are forecasting," said O'Callaghan.

Crude oil fell below $60 a barrel to a six-month low after Iran said it favors talks on the country's nuclear program and BP Plc said the company may restore most of the production at Alaska's Prudhoe Bay within a week.

Iran is open to discuss ``everything'' if the U.S. stops threats of sanctions, President Mahmoud Ahmadinejad said in an interview published yesterday in the Washington Post. BP started work over the weekend to resume pumping about 150,000 barrels a day from the eastern side of Prudhoe Bay later this week, spokeswoman Wendy Silcock said today from London.

``Most of the Iranian premium has come out of the markets,'' Mike Wittner, global head of energy market research at Calyon, said in an interview in London today. ``The U.S. and the Europeans have indicated they are more on a negotiations track and are not going to be pushing quite so hard or quickly for sanctions.''

Crude oil for November delivery fell as much as $1.03, or 1.7 percent, to $59.52 a barrel in after-hours electronic trading on the New York Mercantile Exchange. The contract traded at $59.97 at 2:10 p.m. London time.

Oil has fallen 24 percent from a record $78.40 on July 14. The price of New York-traded crude has declined 9 percent in 12 months.

The eastern part of Prudhoe Bay, the biggest oilfield in the U.S., has been offline since early August, when a corroded pipeline leaked oil. BP is producing 250,000 barrels of oil a day from the western side of the bay.

In London, Brent crude oil for November settlement declined as much as $1.09, or 1.8 percent, to $59.32 a barrel on the ICE Futures exchange. The contract traded at $59.64 a barrel at 2:10 p.m. London time.

``This is a correction,'' Moncef Kaabi, director of research at Ixis Corporate & Investment Bank in Paris, said in an interview. ``It's the coming together of favorable elements both on the supply and demand sides.''

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Oil may fall for a fifth week amid rising U.S. fuel inventories and speculation that losses on natural gas bets at Amaranth Advisors LLC will trigger selling of energy futures by other funds, a Bloomberg survey showed.

Twenty-four of 43 analysts, traders and brokers, or 56 percent, said prices will fall this week, while 12 said prices would rise and seven predicted little change.

U.S. supplies of distillates, a category that includes heating oil and diesel, rose 4.1 million barrels to 148.7 million barrels, the highest since January 1999, according to a Sept. 20 Energy Department report. Stockpiles are now 11 percent higher than last year.

``Oil product levels look very comfortable in the U.S.,'' said Anthony Nunan, assistant general manager for risk management at Mitsubishi Corp. in Tokyo.

Gasoline Drops

Gasoline for October delivery fell 2.03 cents to $1.4509 a gallon in after-hours trading in New York, a seven-month low.

The average price for unleaded gasoline at the pump in the U.S. was $2.384 a gallon yesterday, about 16 percent lower than a month earlier and down 55 cents from the average price a year ago, according to the American Automobile Association, the nation's largest car club.

If the price of crude oil drops further, the Organization of Petroleum Exporting Countries may cut production at its next meeting in December, analysts have said.

``OPEC is watching these prices closely,'' Kaabi said. ``They could cut production if the drop continues and falls below $55 a barrel.''

The basket price from OPEC, a weighted average of several types of crude that is updated daily, fell to $56.12 a barrel on Sept. 22, down more than $12 from the August average of $68.81.

Calyon's Wittner said rising winter demand may drive prices higher again. He expects crude to reach $70 a barrel by the end of the year.

``What's going on right now is seasonal,'' he said. ``Between October and the end of the year, global oil product demand is going to go up. As we grind our way through the next couple of weeks and stabilize with the help of OPEC, there is upside after that.''

Oil prices dropped below $60 a barrel in Asian trading on Monday, and analysts attributed the bailout to high inventories and receding fears about supply threats.

Victor Shum, an energy analyst with Purvin & Gertz in Singapore, said hedge funds and investors were reacting to a soft market but noted that $60 is still a very strong price and said the market was still vulnerable to price spikes.

Light sweet crude for November delivery fell 60 cents to $59.95 a barrel in midmorning Asian electronic trading on the New York Mercantile Exchange.

Oil prices have dropped 23 percent since the middle of July, as supply threats from Iran and Nigeria have diminished alongside fears about this year's Atlantic hurricane season. Signs of economic weakness in the U.S. also have helped push oil prices down.

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"The hedge funds and investors have been bailing out because geopolitical tensions have eased and they also realize that inventories are high during this period of seasonally weak demand at the end of summer," Shum said.

"But as long as there is limited excess production capacity and limited refinery conversion capacity, the market will still be prone to periodic price spikes," he predicted.

The possibility of a production cut by OPEC prompted some buying last week among bargain hunters who believe oil is fairly priced at around $60 a barrel.

The Organization of Petroleum Exporting Countries recently reduced its demand forecast for the remainder of the year, and some cartel members have insinuated that oil prices below $60 could prompt talk of a production cut.

At its most recent meeting OPEC maintained its current output quota of 28 million barrels a day, and some analysts say it will be difficult to convince oil-producing nations to ease up on production at a time of record profit margins.

U.S. Energy Department data showed crude oil inventories declined by 2.8 million barrels last week to 324.9 million barrels _ but that's still 5 percent more than last year and well above the five-year average for this time of year.

Inventories of distillate fuels such as diesel and heating oil grew by 4.1 million barrels last week to 148.7 million barrels, or more than 11 percent above year-ago levels.

Oil and Natural Gas Corp. Ltd. denied a report on Sunday that it was in talks to sell its stake in the Exxon-led Sakhalin-1 project to Russian gas monopoly Gazprom.

"There are no talks with Gazprom on this issue," ONGC Chairman R.S. Sharma told Reuters.

The unsourced report in Britain's Observer newspaper said that Gazprom had confirmed it was in talks to buy the 20 percent stake from ONGC, although a Gazprom source who requested anonymity told Reuters he believed the report to be incorrect.

Gazprom, the world's largest gas company, has been seeking a foothold on the energy-rich island off Russia's Pacific coast via a swap deal with Royal Dutch Shell, which has 55 percent of the neighbouring Sakhalin-2 project.

However, talks on the swap have stalled since Shell unveiled a doubling of its project's budget from $10 billion to $20 billion last year.

As well as angering Gazprom, the move has prompted Russia's Natural Resources Ministry to open an environmental investigation into Sakhalin-2, culminating in its decision to withdraw a key ecological permit last week.

The ministry has also brought pressure on Exxon's venture, which it says plans a similar budget overrun from $12.8 billion to $17 billion.

The ministry says it will not tolerate budget increases because they contravene the terms of the production sharing agreements (PSAs) which govern the two projects.

TOUGH LINE

Under the PSAs, the oil firms can recoup project costs before sharing any profits with the Kremlin, so bigger budgets mean less money later for the Russian state.

The tough line on the two projects has drawn expressions of concern from British, Dutch, European Union, Japanese and U.S. politicians, as well as the companies themselves.

Besides Exxon's 30 percent holding and ONGC's 20 percent, the shareholders in Sakhalin-1 also include a Japanese consortium with a 30 percent stake and Russian state oil firm Rosneft, which holds 20 percent.

Rosneft has interests in most projects on Sakhalin Island and a history of rivalry with Gazprom, even though both are controlled by the Kremlin.

Sakhalin-1 has already begun producing oil and Exxon says it plans to load its first export cargo by the end of September.

It is due to pump 250,000 barrels per day (bpd) of crude by the end of this year, making it one of this year's five-biggest oil projects worldwide and a welcome source of gasoline- and distillate-rich crude for Asian importers.

Gazprom, which wants to boost the oil side of its business, has monopoly power over all gas projects in Russia except for the PSAs. It is not yet involved in any projects on Sakhalin, meaning it is absent from one of Russia's main energy hubs.

A Gazprom spokesman declined to comment on Sunday.

OAO Gazprom, the world's largest natural gas producer, may re-direct to Europe part of the gas from Shtokman, an Arctic offshore field that may hold enough gas to supply the U.S. for more than five years.

``Gazprom is looking into this possibility and such a decision could be taken in the very near future,'' Russian President Vladimir Putin told reporters in Compiegne, near Paris, today after meeting President Jacques Chirac and German Chancellor Angela Merkel.

Gazprom is counting on Shtokman to revive sagging production growth as world demand for gas soars. The Barents Sea field may hold as much as 4.4 trillion cubic meters of gas. Gazprom had planned to make the field its first effort to produce liquefied natural gas for shipment to the U.S.

The state-controlled company put off naming partners for the project until the end of the year, after the U.S. and Russia failed to reach an agreement on Russia's entry into the World Trade Organization during the Group of Eight summit in St. Petersburg, the Wall Street Journal reported July 17.

In Compiegne today, Putin again said that Russia will fulfill its obligations to its oil and gas customers in the face of mounting concern over Russia's role in ensuring global energy security.

``Our plans to develop transport infrastructure are not directed against anyone,'' he said.

Putin said that deliveries from the Shtokman field could ensure supplies for 50 to 70 years, helping to maintain stability in Europe's economy.

The price of high-quality crude oil on the New York Mercantile Exchange fell $1.04 Friday to $60.55 per barrel.

The retreat marks a 5.4 percent loss for the week and puts the commodity at a 10-month low, MarketWatch said.

Natural gas fell 15.4 cents to $4.627 per million Btu, a 7.1 percent loss for the week.

Heating oil fell 3.36 cents to $1.6452 per gallon, and gasoline was off 2.69 cents to $1.4725 per gallon. AAA, meanwhile, said early Friday that the average U.S. retail gasoline price fell to $2.441 per gallon.

Oil prices fell Friday and many analysts said ample worldwide supplies at a time of year when demand is weak could keep downward pressure on crude futures.

Concerns about slowing economic growth in the U.S. and receding fears about this year's Atlantic hurricane season are also influencing selling that has taken oil down by more than 20 percent since the middle of July.

Still, the possibility of a production cut by OPEC, has brought out bargain hunters in recent days who believe oil is reasonably priced at around $60 a barrel.

Light sweet crude for November delivery fell 59 cents to $61 a barrel on the New York Mercantile Exchange. November Brent crude on London's ICE futures exchange declined 64 cents to $60.70 a barrel.

Houston-based oil consultant Dan Lippe of Petral Worldwide said that with worldwide supplies growing, he wouldn't be surprised to see oil back below $50 a barrel, and perhaps as low as $40, within a few years _ if not sooner.

An unexpected supply shock, of course, could drive oil prices right back above $70, he said.

Crude oil futures have plummeted from a July 14 intraday peak of $78.40 a barrel as worries ease about supply threats from Iran and Nigeria, and as signs of economic weakness in the U.S. point to a possible softening in demand for energy.

"We already took $5 out of the oil price because of geopolitics and we're probably going to take out another $5," said Liberty Trading president James Cordier.

"If we have a mild winter," Cordier added, "all of the fund money that pushed crude up toward $80 a barrel is going to get out of the market."

The Organization of Petroleum Exporting Countries recently reduced its demand forecast for the remainder of the year, citing weakening demand in the U.S., among other factors, and some cartel members have insinuated that oil prices below $60 could prompt talk of a production cut. At its most recent meeting late last month OPEC maintained its current output quota of 28 million barrels a day, and some analysts say it will be difficult to convince oil-producing nations to ease up on production at a time of record profit margins.

But Morgan Stanley said in a research note Friday that "there is already some evidence that OPEC has reduced production from the Middle East and is committed to supporting high prices."

The latest U.S. Energy Department data showed crude oil inventories declined by 2.8 million barrels last week to 324.9 million barrels _ but that's still 5 percent more than last year and well above the five-year average for this time of year.

Inventories of distillate fuels such as diesel and heating oil grew by 4.1 million barrels last week to 148.7 million barrels, or more than 11 percent above year-ago levels.

Analysts say that with geopolitical and weather risks easing _ and speculators taking chips off the table _ energy futures are likely to tumble further before stabilizing. Natural gas is most vulnerable to further declines, at least until the first cold snap arrives in the U.S., they said.

U.S. stocks data showed domestic natural gas inventories increased by 93 billion cubic feet last week to 3.18 trillion cubic feet _ a record level for this time of year and 12.5 percent above year ago levels.

Nymex natural gas futures fell 3.6 cents to $4.745 per 1,000 cubic feet.

Oil prices rebounded on bargain-hunting Thursday, while natural gas futures fell to a new two-year low as U.S. supplies of the home-heating fuel continue to rise.

Liberty Trading president James Cordier said that with geopolitical and weather risks easing _ and speculators taking chips off the table _ energy futures could continue to tumble.

Natural gas is most vulnerable to further declines, at least until the first cold snap arrives in the U.S., while oil could find support around the $60 level, Cordier said.

If the Northern Hemisphere winter is mild and economic growth continues to slow, "all of the money that helped push crude up toward $80 a barrel is going to get out of the market," Cordier said.

Thursday's selloff in natural gas came after the Energy Department said domestic natural gas inventories increased by 93 billion cubic feet last week to 3.18 trillion cubic feet. It's a record level for this time of year and 12.5 percent above year ago levels.

Natural gas supplies were ample _ and prices were falling _ heading into the summer because a warm winter last year sapped home-heating demand. The downward pressure on prices picked up as fears that hurricanes would disrupt Gulf of Mexico output never materialized.

October natural gas futures on the New York Mercantile Exchange fell 15 cents to settle at $4.78 per 1,000 cubic feet _ the lowest closing price for the front-month contract in more than two years.

Nymex oil futures for November delivery rose by 85 cents to settle at $61.59 per barrel as bargain hunting traders snapped up contracts that were discounted the day before by a surge in U.S. distillate supplies. November Brent crude on London's ICE futures exchange rose 21 cents to $60.68 a barrel.

"Some market participants think it's a buy opportunity," Victor Shum, energy analyst with Purvin & Gertz in Singapore.

In other Nymex trading Thursday, unleaded gasoline futures rose more than 3 cents to settle at $1.4994 a gallon, while heating oil futures rose more than 3 cents to settle at $1.6788 a gallon.

The benchmark Nymex oil price on Wednesday briefly fell below $60 a barrel _ the level OPEC has hinted could initiate an output cut.

Crude oil futures have fallen roughly 20 percent over the past two months as worries ease about supply threats and amid speculation possible economic weakness in the U.S. could soften energy demand.

Crude oil rebounded from a six-month low because of concern that gasoline use in the U.S., the world's largest energy consumer, continues unabated.

Gasoline demand advanced 4.6 percent last week from 2005, the U.S. Energy Department reported yesterday. Crude oil fell below $60 for the first time since March 21 yesterday after U.S. President George W. Bush supported diplomatic efforts to end a dispute with Iran, the world's fourth-largest oil supplier, and as fuel inventories gained.

``When you look at the overall picture, we don't see any change in demand,'' said Gavin Wendt, senior resources analyst at Fat Prophets Funds Management in Sydney. ``People are still driving their cars.''

Brent crude for November delivery rose as much as 50 cents, or 0.8 percent, to $60.97 a barrel. The contract traded at $60.85 at 1:22 p.m. in London on the ICE Futures exchange.

New York-traded crude has declined 22 percent from a record $78.40 a barrel reached on July 14. Prices fell as fuel stockpiles in the U.S. rose and as tensions in the Middle East eased.

``There was some heavy selling yesterday before the DOE statistics, and again they show a very solid build on important products,'' Tom Hammervold, an oil trader at Norsk Hydro ASA, said by phone from Oslo.

``The geopolitical environment has calmed down and the key risks have been reduced,'' Hammervold said. ``There have been really bearish undertones. You haven't had any support from bullish news for over a month now.''

Below $60

The October contract for New York crude, which expired yesterday, declined to $59.80, the lowest intraday price for the front-month contract since March 21. It closed 2 percent lower at $60.46 a barrel.

The November contract was at $61.15 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 1:23 p.m. in London.

``Most of the weakness yesterday'' was caused by strong U.S. inventories, Tony Machacek, a Bache Financial Ltd. broker, said by phone from London. ``The distillate build was the most negative element.''

Gasoline inventories rose 560,000 barrels to 207.6 million, the Energy Department report showed. Crude-oil supplies dropped 2.84 million barrels to 324.9 million.

Analysts expected greater gains in gasoline and a smaller drop in crude supplies, according to a Bloomberg News survey of 16 people. Still, inventories are above averages. Crude oil supplies are 5.5 percent higher than a year earlier.

OPEC Basket Price

The basket price from the Organization of Petroleum Exporting Countries, a weighted average of several types of crude that is updated daily, fell to $56.54 a barrel on Sept. 20, down from the August average of $68.81.

OPEC left its production quota unchanged at this month's meeting in Vienna. The group has said it may cut output if prices fall below $60 for a sustained period of time.

``If it falls much below $60, I would imagine they will cut back on production,'' Hammervold said.

``There's still the possibility over the next 12 months or so, if there is any sort of supply disruption or further tension in the Gulf, you'll see oil prices over $100 a barrel,'' Greg Smith, managing director of Global Commodities Ltd., said in an interview in Singapore.

Oil imports to fuel China's booming economy soared by 17.6 percent in the first half of this year, despite its efforts to reduce reliance on foreign energy supplies, the government said Thursday. Net crude oil imports from January to June totaled 492 million barrels, or 43 percent of China's consumption, the official Xinhua News Agency said, citing statistics released by the customs agency. China has sharply increased oil imports in recent years to drive its economic boom. State companies have signed multibillion-dollar deals to develop oil and gas fields in Africa, Central Asia and Latin American. But Beijing also is trying to reduce reliance on foreign energy supplies, which it sees as a strategic weakness. It is trying to develop new Chinese oil fields and is promoting conservation and alternative energy sources such as nuclear power. China's imports in January-June included 94 million barrels from Angola, or 18.2 percent of the total, Xinhua said. Other foreign suppliers were Saudi Arabia, Iran, Russia, Oman, Equatorial Guinea, Yemen, Congo, Libya and Venezuela, the report said, without giving detailed figures. China's total oil consumption last year was 2.2 billion barrels, which was a slight decline from 2004, Xinhua said.

Oil prices fell below $60 a barrel on Wednesday for the first time in six months on swelling U.S. winter fuel stocks, but top exporter Saudi Arabia said the market may have fallen enough.

U.S. crude dropped $1.86 to $59.80 a barrel, the lowest since March 21, in electronic trading after settling the regular trading session down $1.20 at $60.46 a barrel.

Oil has retreated roughly $18 from its July record of $78.40 in its steepest decline in 15 years. U.S. oil has erased all the gains it made since ending 2005 at $61.04.

London Brent was down $1.70 at $60.47 a barrel.

Brimming inventories of U.S. distillates fuel rose more than expected last week to their highest level since January 1999, the government reported on Wednesday.

Distillates, which include heating oil, rose 4.1 million barrels, compared with forecasts for a rise of 1.9 million barrels among analysts polled by Reuters.

U.S. fuel inventory levels have bolstered a perception among investors that the world's biggest oil consumer was well prepared to meet winter demand.

Stocks are also high in other large consumers, such as Japan and Germany.

"Everything is bearish in this market. Sentiment has completely changed and we are still going lower here as there are no signs that we are bottoming out," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.

The price slide has revived discussion about what price level would prompt the Organization of Petroleum Exporting Countries to cut production to stem the fall.

Saudi Oil Minister Ali al-Naimi on Tuesday described prices as reasonable for the first time since the market scaled record highs. "The oil industry is convinced that this price is reasonable," Naimi told reporters in Riyadh.

"Prices now are rewarding to both producers and consumers and their impact on the global economy is small."

Some OPEC ministers have signaled a price of $50 to $60 a barrel should be sustained, but the cartel has avoided setting a formal target. The OPEC basket stood at $58.85 on Tuesday.

"It all depends now on how fast the price declines," said Eoin O'Callaghan of BNP Paribas. "It would be difficult for OPEC to justify a cut with the U.S. price above $60 and concerns about a U.S. economic slowdown. But it is our view that some time in the near future OPEC will have to cut."

FUNDS HURTING

Price falls are hurting investment funds that have poured billions of dollars into energy markets as they bet on tight supplies for years ahead.

"Lots of people are losing money and hedge funds must liquidate their long positions," said Tetsu Emori, chief strategist at Mitsui Bussan Futures. "Fundamentals are also getting weaker."

The $9 billion Amaranth Advisors fund told investors this week it may be hit by billions of dollars in losses due to the sharp drop in natural gas prices.

Oil supply risks related to Iran's nuclear ambitions also appeared to be easing further. Foreign ministers from the major powers -- the United States, Russia, China, Britain, France and Germany -- agreed on Tuesday to give European Union foreign policy chief Javier Solana more time to explore a possible nuclear deal with Iran.

"Clearly now, a serious negotiation phase will follow, so the chances that Iran's oil will be withdrawn from the market any time soon have gone from low to very low," said Tobin Gorey, commodity strategist with Commonwealth Bank of Australia.

Oil prices slid to fresh six-month lows on Wednesday on rising winter fuel stocks and waning concern over Iran, but the world's largest exporter Saudi Arabia signaled prices may have fallen enough.

U.S. crude was down 77 cents at $60.89 a barrel at 1130 GMT after falling nearly $2 on Tuesday.

Oil has retreated over $17 from its July record high of $78.40 in its steepest decline for 15 years.

London Brent was down 73 cents at $61.44.

The slide has revived discussion about what price would trigger a cut in OPEC production to stem the fall.

Saudi Oil Minister Ali al-Naimi on Tuesday described prices as reasonable for the first time since the market scaled record highs. "The oil industry is convinced that this price is reasonable," Naimi told reporters in Riyadh.

"Prices now are rewarding to both producers and consumers and their impact on the global economy is small."

Some OPEC ministers have signaled a price of $50-$60 a barrel should be sustained, but the cartel has avoided setting a formal target. The OPEC basket stood at $58.85 on Tuesday.

"It all depends now on how fast the price declines," said BNP Paribas analyst Eoin O'Callaghan.

"It would be difficult for OPEC to justify a cut with the U.S. price above $60 and concerns about a U.S. economic slowdown. But it is our view that sometime in the near future OPEC will have to cut."

INVENTORIES

Data due later on Wednesday is expected to show brimming U.S. fuel inventories rising further.

Supplies of distillates, which include heating oil, were forecast to rise by 1.9 million barrels, a Reuters poll found. Distillate stocks were already near seven-year highs last week.

Winter fuel inventory levels have led to growing perception among investors that the world's biggest oil consumer is well prepared to meet cold-weather demand.

Stocks are also high in other large consumers Japan and Germany.

"There is no support at all for crude oil coming from product markets," said O'Callaghan. "We are seeing all the factors that supported the market in the summer unwind."

Price falls are hurting investment funds that have poured billions of dollars into energy markets as they bet on tight supplies for years ahead.

"Lots of people are losing money and hedge funds must liquidate their long positions," said Tetsu Emori, chief strategist at Mitsui Bussan Futures. "Fundamentals are also getting weaker."

The $9 billion Amaranth Advisors fund told investors earlier this week it may be hit by billions of dollars in losses due to the sharp drop in natural gas prices.

Oil supply risks related to Iran's nuclear program also appeared to be easing further as U.S. Undersecretary of State Nicholas Burns said Washington would support further talks by European negotiator Javier Solana to find a diplomatic solution.

"Clearly now a serious negotiation phase will follow so the chances that Iran's oil will be withdrawn from the market any time soon have gone from low to very low," said Tobin Gorey, commodity strategist with Commonwealth Bank of Australia.

CanArgo Energy Corp. (CNR)

Last Trade:	1.4700
Trade Time:	3:28PM ET
Change:	0.1700 (13.08%

CanArgo Energy Corporation ("CanArgo") today issued an update on the Manavi M12 well which is currently drilling in Georgia.

Whilst drilling ahead through the Cretaceous limestone reservoir a significant gas influx was observed, with up to 20% gas recorded at surface and with heavily gas-cut drilling mud. Traces of condensate were also observed in the mud. Drilling was temporarily halted at a depth of 4,733 metres (15,528 feet) in order to increase the mud weight to control the flow. Cuttings samples indicate a fractured porous vuggy white limestone, and oil/bitumen staining has been noted together with light oil/condensate shows. The mud weight is still being increased to control the well, after which it is planned to re-commence drilling through the reservoir whilst hydrocarbon shows continue. It is anticipated that total depth will be reached in early October 2006 after which logs will be run to evaluate the zones to be tested.

CanArgo is an independent oil and gas exploration and production company with its oil and gas operations currently located in the Republic of Georgia and in Kazakhstan.

Amaranth Advisors, a hedge fund with $7.5bn under management, has warned investors that its main funds are down 35 per cent or more this year after big losing bets on natural gas prices.

"We are in discussions with our prime brokers and . . . are working to protect our investors while meeting the obligations of our creditors,'' Nicholas Maounis, Amaranth's founder, said in a letter to investors.

Natural gas prices have fallen more than 40 per cent since early August on strong storage levels and predictions of a mild winter.

One senior prime brokerage executive said the fact that Amaranth's main funds are now down 35 per cent meant they had lost over 50 per cent in the past few weeks.

A fund of hedge funds manager, said: "We are not very bullish for oil and gas. Where there is smoke there is fire, and they are probably not the only ones."

He added that Amaranth's funds were up about 20 per cent for the year as recently as mid-August, and that the firm's losses over the past few weeks could be as high as $4bn. Amaranth was founded in 2000 and bills itself as a multi-strategy fund specialising in energy trading, merger arbitrage, convertible bond and long-short strategies.

The fund is among the biggest players in the energy market and trades heavily with the commodities desks of large Wall Street firms. It receives prime brokerage services from Morgan Stanley, among others.

The fund made large losing bets on the difference in price between contracts for natural gas delivery in the summer and winter. Instead of widening, as Amaranth predicted, spreads have narrowed. Volatile gas prices last month led to the closure of $400m hedge fund MotherRock, run by Bo Collins, former New York Mercantile Exchange president.

In its letter to investors, Amaranth said it was "aggressively reducing" its natural gas positions and has so far met every margin call. Amaranth employs about 21 energy traders. In Greek myth its name refers to an immortal flower.

Traders said Amaranth could cause some volatility by moving quickly to liquidate holdings to meet margin calls and possible investor redemptions. Yesterday, Amaranth urged Canadian DVD and CD manufacturer Cinram to go private or consider a sale to increase shareholder value. Amaranth owns about 15 percent of Cinram.

- Oil prices rose for a third day on Tuesday, climbing back above $64 after a fresh delay to BP's giant Thunder Horse oilfield in the Gulf of Mexico underscored the difficulty in meeting future demand growth.

U.S. light crude for October delivery rose 25 cents at $64.05 a barrel by 0340 GMT, extending a rebound from last Friday's intra-day six-month low of $62.03 a barrel. London Brent crude rose 33 cents to $64.38 a barrel.

Prices rallied 47 cents on Monday, the biggest rise in three weeks, after BP said that production from Thunder Horse, would be commissioned only in 2008. The oil major's previous target called for first oil sometime in mid-2007.

"The supply margin is so thin, every little blip is going to move the market. And the acute geopolitical risks have lessened but the chronic geopolitical risks are still there," said Tony Nunan, risk manager at Mitsubishi Corp. in Tokyo.

Thunder Horse, set to be the biggest field in the Gulf of Mexico with 250,000 barrels per day (bpd) of production, was initially scheduled to start producing in 2005 but hurricane damage and equipment problems have caused repeated delays.

The news helped shift traders' focus from hefty inventories and plentiful supplies during the weak autumn demand period to expectations that robust economic growth will continue to drive oil demand higher in the coming years, straining markets.

OPEC cut its forecast for demand for its oil in 2007 last week, saying average demand would be 800,000 bpd less than the 28.9 million bpd expected in 2006, partly due to the start-up of several major non-OPEC fields, including Thunder Horse.

Growth in non-OPEC supply has fallen short of forecasts in recent years.

HEALTHY STOCKS TO LIMIT UPSIDE

Oil prices have lost some $16 or close to 20 percent over the past two months, the steepest fall from a peak since 1991, amid rising oil inventories in the United States and easing risks related to Iran and the hurricane season.

OMNI Energy Services Corp. (OMNI)

Last Trade:	8.25
Trade Time:	3:46PM ET
Change:	1.10 (15.38%)

Drilling services company Omni Energy Services Corp. on Monday raised its 2006 earnings and revenue forecasts on increased utilization rates of equipment and personnel.

Shares of the company rose over 16 percent, or $1.15, to $8.30 in afternoon trade, making it one of the top gainers on the Nasdaq.

The company expects net income from continuing operations to range from $18 million to $19 million, or 74 cents to 78 cents a share, on revenue of over $90 million.

In January, the company had forecast net income of $5 million or more, on revenue of over $75 million for the year.

Two analysts on average expect the company to earn 66 cents a share, before special items, on revenue of $96.3 million in 2006, according to Reuters Estimates.

In a statement, Omni Energy said it expects to close the acquisition of Rig Tools Inc. in the fourth quarter. In February, the company had completed the acquisition of Preheat Inc.

The company expects Rig Tools to report pro-forma net income of more than $1.3 million on projected revenue of about $13 million for 2006.

On a pro-forma basis, including results of Preheat and Rig Tools, Omni Energy expects net income of $19 million on revenue of $105 million to $110 million for the year, the company said

Plains Exploration & Production Co. (PXP)

Last Trade:	43.92
Trade Time:	3:39PM ET
Change:	4.06 (10.19%)

Norwegian energy group Statoil on Monday said it would pay $700 million for rights to two U.S. Gulf of Mexico deepwater discoveries and one exploration prospect from U.S. oil company Plains Exploration & Production Co.

The deal strengthens Statoil's presence in the U.S. Gulf region, seen as a major growth area, as its core Norwegian fields mature. It also drove Plains Exploration shares up more than 8 percent.

Earlier this month Statoil, along with U.S. partners Chevron Corp. and Devon Energy Corp, announced a "record-setting" deepwater find at a Gulf of Mexico appraisal well located close to the Norwegian company's new assets.

"We like Statoil's strategy of building up a significant presence in this promising area, which may help create a basis for production growth after 2010," Arnstein Wigestrand, an analyst at SEB Enskilda in Oslo, said in a research note.

Statoil also bought rights of first negotiation for acquiring other Plains deepwater Gulf of Mexico assets.

"The next step will be to acquire operatorship in the Gulf of Mexico," Statoil Executive Vice President Peter Melbye told a conference call with analysts and journalists. "We believe the value creation potential is significant."

Plains Exploration Chief Executive Jim Flores declined to estimate reserves at the two fields and said the Houston company did not know how much the properties would have contributed to its revenues.

But Plains Exploration, which will use the proceeds to reduce debt and buy back stock under a $400 million repurchase program, said its share price had not reflected the reserves' value.

"On a financial and market basis, the ability to monetize these assets today and buy stock in (Plains) at such a severe discount, it's just way too compelling," Flores told a conference call.

Statoil officials say the state-controlled company is well placed to take advantage of Gulf of Mexico finds, with its deepwater expertise gained from its activities on the Norwegian Continental Shelf, where oil production is now peaking.

Statoil shares were up around 2.5 percent at 162 crowns in afternoon dealings in Norway, valuing the company at around $53 billion, compared with a 0.8 percent rise on the Dow Jones oil and gas index <.SXEP>.

Plains shares jumped $3.34, or 8.4 percent, to 43.20 on the New York Stock Exchange.

Standard & Poor's said the purchase would not alter its credit ratings on Statoil debt, but added that the buy would provide with medium- to long-term benefits to the company.

The transaction is scheduled to close in November. Existing leaseholders have preemption rights that must be exercised no later than 30 days after they have been notified of the sale.

100,000 BARRELS PER DAY

Statoil officials also declined to disclose the potential size of production from its acquisition, saying only that it would contribute to its target of 100,000 barrels of oil per day from the Gulf of Mexico after 2012.

Both companies hailed the deal as a possible opening to future sales of Plains' in Gulf properties under development.

The new assets are located in the Greater Tahiti area and include working interests of 17.5 percent in the Caesar discovery operated by Royal Dutch Shell Plc and 12.5 percent in the Chevron-operated Big Foot discovery.

Statoil will also gain a 12.5 percent stake in the Chevron-operated Big Foot North prospect.

The Caesar discovery is located between the Chevron-operated Tahiti and Tonga discoveries, in both of which Statoil has a 25 percent interest. Tahiti is under development and due to come on stream in 2008, Statoil said. Company officials said production at the Caesar discovery is expected to start in 2010 or 2011.
The Big Foot discovery lies in the Walker Ridge area close to the Jack and St Malo discoveries operated by Chevron.

Oil prices rose Monday after BP PLC said output from a massive Gulf of Mexico platform damaged by last year's Hurricane Dennis would not be restored until mid-2008, at the earliest.

BP's Thunder Horse platform, which has the capacity to produce as much as 250,000 barrels per day of oil and 200 million cubic feet a day of natural gas, had been expected to be running by early 2007. But the London-based company announced Monday that new subsea equipment failed during a test and that it will need to be rebuilt.

Light sweet crude for October delivery climbed 47 cents at $63.80 a barrel on the New York Mercantile Exchange, where natural gas futures rose 13.8 cents to $5.12 per 1,000 cubic feet.

Energy futures have been in a tailspin in recent weeks due to a combination of soaring global inventories, a weakening U.S. economy and a perception of reduced geopolitical and hurricane threats.

On Friday, the Organization of Petroleum Exporting Countries said fourth-quarter demand for its oil would be 320,000 barrels a day lower than previously forecast, or 28.86 million barrels per day.

Analysts say there has been a shift in energy-market psychology since prices peaked above $78 in July, as traders focus on the relatively comfortable balance between supply and demand as opposed to the hypothetical supply threats.

Still, a senior Iranian official warned against international sanctions over its nuclear program on Monday, saying Tehran would respond to such "hostile action" over his country's refusal to freeze uranium enrichment by cutting international inspections.

Iranian Vice President Reza Aghazadeh issued the threat amid urgings by the head of the U.N. nuclear monitoring agency for a start to talks between Iran and six world powers on easing world concerns that Tehran could be seeking to make an atomic bomb.

In other Nymex trading, heating oil futures gained more than a penny to $1.7141, while gasoline futures rose by 1.45 cent to $1.5895 per gallon.

Oil prices opened the week higher Monday in Asia, on the belief that oil cartel OPEC may slash output after forecasting reduced demand ahead of the Northern Hemisphere's peak winter months.

Benchmark light, sweet crude for October delivery on the New York Mercantile Exchange was up by as much as 37 cents to $63.70 a barrel midmorning in Singapore electronic trade before easing slightly to $63.57 from Friday's $63.33 closing.

On Friday, the Organization of Petroleum Exporting Countries said fourth-quarter demand for its oil would be 320,000 barrels a day lower than previously forecast, or 28.86 million barrels per day.

Analysts say prices, which are nearly 20 percent lower than their peak of $78.40 a barrel in July could prompt OPEC, which pumps about 40 percent of total global crude, to slash production to bolster prices.

Traders said market players were reluctant to sell now, waiting instead for demand to pick up ahead of winter. Demand for distillates, including heating oil, spikes for the Northern Hemisphere winter.

The price of crude oil on the New York Mercantile Exchange rose a modest 11 cents Friday to end the session at $63.33 per barrel.

That marks a 4.4 percent loss for the week, a 5-day period in which natural gas -- which fell Friday by 9 cents to $4.982 per million Btu -- lost 12.2 percent of its value, MarketWatch reported.

Heating oil held generally steady at $1.703 per gallon and gasoline crept up slightly to $1.57 per gallon.

Early Friday AAA said the average U.S. retail gasoline price fell to $2.554 per gallon.

Oil slid briefly below $63 a barrel on Friday, touching its lowest level since March as U.S. fuel stockpiles grew ahead of winter and investors probed for a price that would trigger an OPEC supply cut.

U.S. crude dropped as low as $62.03 per barrel, the cheapest since March 23, before settling up 11 cents at $63.33. London Brent crude was off 21 cents at $63.33.

"Our sense is the market might like to test where OPEC wants to set the price floor," said Frederic Lasserre, head of commodity research at Societe Generale.

"The psychology of the market has really turned. It looks like the market will be oversupplied next year unless OPEC does something."

The Organization of the Petroleum Exporting Countries (OPEC) on Friday cut its demand forecast for its oil by 200,000 barrels per day (bpd) next year, when supply from rival producers is expected to surge.

The group's own economists expect demand for OPEC oil in 2007 to be 800,000 bpd below this year.

OPEC ministers kept oil output steady near a 25-year high at a meeting this week, but left the door open to a supply cut before the end of the year. They have been at pains to avoid setting a price target they would defend.

"(OPEC ministers) have not had to think about cutting output to defend prices for a long time, but the question is now front and center in the market," said Mike Wittner of Calyon.

Top world exporter Saudi Arabia would start quietly trimming supplies if U.S. crude fell to around $60, Wittner said.

U.S. FUEL STOCKPILES HIGH

Oil has fallen more than 20 percent from its mid-July record of $78.40 as the supply picture improves.

Mounting evidence that the United States has enough fuel stocks to meet winter heating demand further pressured prices.

Natural gas stocks are over 12 percent above the average for the last five years. And distillate stocks, which include heating oil, are at their highest level since October 1999.

After falling through the $65 level.......Crude Oil now seems destined to test support around $60 a barrel.

Oil fell below $63 a barrel on Friday, its lowest level since March, as ample U.S. fuel stocks looked set to meet winter heating demand in the world's biggest consumer.

U.S. crude was off 42 cents at $62.80 a barrel at 1319 GMT after falling 64 cents on Thursday.

London Brent crude was off 36 cents at $63.18.

U.S. natural gas futures sank to a two-year low on Thursday after a surprise rise in stocks. Natural gas stocks are over 12 percent above the average for the last five years.

Distillate stocks, which include heating oil, also jumped more than expected and were well above the five-year average, according to the U.S. government.

"The large natural gas and distillate stocks are the main bearish factors that have brought prices down again," said Tetsu Emori, chief strategist at Mitsui Bussan Futures.

Oil fell sharply to near $63 a barrel on Thursday, extending a nearly 20 percent slide over the past month as bulging U.S. inventories countered geopolitical worries.

U.S. crude settled down 75 cents at $63.22 a barrel after touching a five-month low of $63.00 in intraday activity. Thursday's losses came after a 21-cent rise on Wednesday snapped a seven-session slide that lopped 12 percent off prices, the longest losing streak in three years.

London Brent was down 75 cents at $62.24, off more than a $16 from its August 8 record high and the steepest retreat since the 1991 Gulf War.

U.S. inventory data released this week showed builds in natural gas and distillate stocks, including heating oil, increasing the world's top energy consumer's supply cushion ahead of the northern winter.

"The bearish (natgas) number basically just piled on to the bearish news throughout the energy complex, following up on the huge distillate build report in yesterday's oil stats," said Katherine Spector of J.P. Morgan.

Natural gas prices fell below $5 per million British thermal units for the first time in two years.

Markets were also soothed when tanker loadings resumed at Nigeria's Brass export terminal overnight after a brief break due to a strike by oil unions, ship agents said on Thursday.

A three-day strike over insecurity in the Niger Delta began on Wednesday, but oil unions suspended the strike on Thursday.

The U.S. Department of Transportation on Thursday said it was reviewing a request by BP Plc to restart production at the eastern section of its Prudhoe Bay oil field in Alaska.

BP shut the field, the largest in the United States, in August due to severe pipeline corrosion. The oil major has restarted some production, but needs to resume output from the east to test and repair pipelines.

Underlining the view that supplies were robust, a spate of refinery run cuts across Asia deepened on Thursday.

Oil dealers were debating whether the price gains were a short-term bounce or a resumption of a four-year rally fueled by robust economic growth.

The International Monetary Fund said on Thursday the economic outlook was even stronger for next year. In its twice-yearly World Economic Outlook, the IMF raised its 2007 global growth forecast to 4.9 percent from 4.7 percent.

Oil advanced for a second day after U.S. stockpiles fell more than expected and the State Department demanded sanctions on Iran.

Crude supplies dropped 0.9 percent, more than forecast by analysts, to 327.7 million barrels last week, a government report said. The U.S. urged the United Nations to punish Iran, the world's fourth-largest oil supplier, for failing to halt uranium enrichment. Oil has fallen 18 percent in two months.

``It's certain that the Iranian nuclear dossier is not closed,'' said Jean-Bernard Guyon, who manages the Global Energy Fund at Global Gestion France in Paris.

Crude oil for October delivery rose as much as 68 cents, or 1.1 percent, to $64.65 a barrel. The contract was up 27 cents at 10:39 a.m. in London in after-hours electronic trading on the New York Mercantile Exchange.

Oil has plunged since reaching a record $78.40 a barrel on July 14 after fighting in Lebanon ceased and as the U.S. hurricane season has been milder than forecast. Oil prices also fell as the end of the U.S. vacation season reduced the use of gasoline.

Oil ministers from the Organization of Petroleum Exporting Countries meeting in Vienna this week said they were concerned about the pace of the drop. OPEC agreed Sept. 11 to keep its output target unchanged at 28 million barrels a day. Kazem Vaziri- Hamaneh, Iran's oil minister, said Sept. 12 that oil prices below $60 could prompt moves to curtail production.

``If the price comes below $60 a barrel, then definitely they would act,'' said Manouchehr Takin, senior petroleum analyst for the Center for Global Energy Studies, a London-based consulting firm. ``They have given a warning that by the coming months, if the price falls too much, they could have a meeting and try to curtail production,'' he said in an interview today.

`Rosy' IMF Outlook

The International Monetary Fund today raised its forecast for global economic growth even as the U.S. economy, the world's largest, slowed in the second quarter after 17 consecutive interest rate increases over two years by the Federal Reserve.

The world's economy will expand 5.1 percent this year and 4.9 percent in 2007, the fund, comprising 184 nations, said today in Singapore. Both forecasts are 0.2 percentage points higher than the April predictions. Growth was 4.9 percent in 2005.

``The IMF had a more rosy outlook; there may be stronger growth in oil demand than many people are forecasting,'' Takin said.

The International Monetary Fund also raised its 2007 oil price forecast 20 percent to $75.50 a barrel, citing the risk of cuts in supply from major producers amid rising consumption. The IMF boosted the forecast for next year from $63, which it predicted in April. The measure is an average of expected spot prices for Brent, Dubai and West Texas Intermediate crude grades.

`Two-Day Bounce'

New York-traded crude rose 21 cents, or 0.3 percent, to $63.97 a barrel yesterday, its first gain since Aug. 31. The contract traded as low as $63.50, the lowest price since March 27.

``We may see a little two-day bounce here,'' said Bob Frye, a commodity broker at Access Futures & Options Trading in Woodlake, California. ``We've had a pretty easy slide down from $69'' and some traders will be buying back in, he said.

In London, Brent crude oil for October settlement advanced 26 cents, or 0.4 percent, to 63.25 a barrel on the ICE Futures exchange. The contract, which expires today, was earlier as high as $63.77.

The decline in U.S. oil stockpiles left them 11.7 percent above the five-year average for the period, the U.S. Energy Department said. The median forecast of 14 analysts surveyed by Bloomberg News predicted a fall of 2 million barrels.

The well publicized pull back in oil prices may be a tremendous buying opportunity. Crude rallied hard after a correction in February and a re-test of the previous lows could send crude back into the low 70s in the near term.

Oil prices rose slightly on Wednesday, gaining some ground after seven straight days of drops as the U.S. government reported a decrease in the nation's crude inventories.

U.S. crude inventories fell 2.6 million barrels to 327.7 million barrels last week, according to the Energy Information Administration. They're still 5.6 percent above year-ago levels, though, and above the upper end of the average range for this time of year.

Light sweet crude for October delivery on the New York Mercantile Exchange gained 27 cents to $64.03 a barrel in morning trading. The contract had settled at $63.76, down $1.85, on Tuesday _ the lowest front-month closing price since March 22.

Nymex crude has ended lower on every trading day so far this month.

The drop in crude stocks was larger than expected, but the increase in distillate fuels _ which include heating oil, a key commodity as the winter approaches _ was bigger than most analysts had forecast.

Distillate inventories climbed 4.7 million barrels to 144.6 million barrels. That's 5.8 percent above last year, thanks to increased production to nearly 4.5 million barrels a day, which is the second-highest weekly average ever, the EIA said. Just a couple of weeks ago, distillate inventories were below year-ago levels.

According to a Dow Jones Newswires survey of analysts, U.S. crude oil inventories were expected to fall 1.5 million barrels, while distillates stocks were expected to gain 1.6 million barrels.

Meanwhile, gasoline inventories rose 100,000 barrels to 207.0 million barrels _ 6.4 percent above last year, the EIA said.

Motor gasoline, distillate fuel and jet fuel demand remained strong, staying above year-ago levels, the EIA said.

Heating oil prices fell more than a cent to $1.7525 a gallon, while unleaded gasoline rose nearly 2 cents to $1.1570 a gallon. Natural gas futures fell about 10 cents to $5.465 per 1,000 cubic feet,

Oil prices fell 3 percent on Tuesday after the Paris-based International Energy Agency lowered its expectations of global oil demand growth for this year and next, citing economic weakness in Europe and parts of Asia.

Crude prices reached an intraday record of $78.40 in July but have fallen on an ease in global demand and in supply threats. Although geopolitical tensions appeared to be on the backburner for the moment, some market participants kept a close eye on developments in Nigeria and the Middle East.

Crude oil dropped below $64 a barrel in New York after the International Energy Agency cut its global consumption estimates.

Global oil demand will average 84.7 million barrels a day this year, 100,000 barrels less than was forecast last month, the Paris-based IEA said. Middle East nations will spend $94 billion by 2011 to meet energy demand, Saudi Arabia's Oil Minister Ali al-Naimi said. Yesterday, the Organization of Petroleum Exporting Countries decided in Vienna to keep production quotas unchanged.

``We're in the midst of a tectonic change,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``The rally that's lasted almost five years may be over. We keep seeing lower demand estimates which show the impact of very high prices.''

Crude oil for October delivery fell $1.71, or 2.6 percent, to $63.90 a barrel at 2:23 p.m. on the New York Mercantile Exchange. Futures touched $63.87, the lowest since March 27. Futures have declined seven days, the longest stretch since October 2003.

Brent crude oil for October settlement fell $1.29, or 2 percent, to $63.26 a barrel on the London-based ICE Futures exchange. Futures touched $63.10, the lowest since March 27.

The forecast for oil consumption next year was cut by 160,000 barrels a day to 86.2 million, according to the Paris- based IEA. The IEA, which was founded in November 1974 in response to the Arab oil embargo, coordinates energy policies of 26 developed nations.

Extra Supply

``We're trying to catch our breath after a week of big drops,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Tilburg, the Netherlands. ``There's a lot of extra supply, which suggests that demand isn't growing as quickly as before.''

Oil has plunged 17 percent from a record $78.40 a barrel on July 14 on signs demand growth will slow and as Middle East tensions ease. Iran will lobby the group to cut output quotas if prices fall below $60 a barrel, said Kazem Vaziri-Hamaneh, the country's oil minister.

OPEC, which supplies 40 percent of the world's oil, agreed at yesterday's meeting to keep its output target unchanged at 28 million barrels a day. Qatar's oil minister Abdullah bin Hamad al-Attiyah said yesterday that the group may consider cutting output at its next meeting in December if prices fall.

Balanced Markets

``By 2011, the countries of the Middle East will invest some $94 billion in their oil and gas upstream sectors, more than half of which will go to expand oil-production capacity,'' al-Naimi said at a seminar held in Vienna's Hofburg Palace. ``A key tenet of our capacity development and utilization strategy is to ensure balanced markets at all times.''

Earlier today, the International Monetary Fund said high oil prices and faster inflation are among the chief risks to financial markets. IMF Managing Director Rodrigo De Rato, who is attending the seminar, said producers must move ahead with investments to increase oil supply, ease prices and lower the risk of inflation.

``Some value buyers will come in until we get to the next data point or geopolitical news that will shake the market,'' said John Kilduff, vice president of risk management at Fimat USA in New York. ``In February there was a fall of a bigger magnitude and look what happened.''

Anadarko Hedges Acquired Oil, Gas

Oil and gas producer Anadarko Petroleum Corp. on Tuesday said it has hedged about 75 percent of the resources acquired in its takeovers of Kerr-McGee and Western Gas Resources last month.

Anadarko said its hedges in place as of Sept. 11 total about 229,000 barrels of oil equivalent per day for the fourth quarter. Hedges total 195,000 barrels of oil equivalent per day in 2007 and 169,000 barrels in 2008.

The hedges amount to about 85 percent, 72 percent and 63 percent of the acquired oil and natural gas volumes, respectively.

The company hedged its fourth-quarter oil production at $53.04 per barrel for fixed and physical contracts and its 2007 production at $51.44. Natural gas was hedged at $7.29 per million British thermal units for the fourth quarter and at $6.96 for 2007, for fixed and physical contracts at all locations.

Combined, Kerr-McGee and Western Gas Resources produced about 270,000 barrels of oil and gas daily in the second quarter.