Exxon Mobil to Lead $1.3B Alaska Project

ANCHORAGE, Alaska -

Exxon Mobil Corp. said late Tuesday it will lead a $1.3 billion project to drill for hydrocarbons in the Point Thomson field on the Alaska North Slope.

The Irving, Texas-based company, the largest U.S. oil producer, said drilling will begin during the 2008-2009 winter season, with initial production slated for the end of 2014. Exxon Mobil (nyse: XOM - news - people ) said it has submitted its plan to the Alaska Department of Natural Resources.

Other Point Thomson Unit (nyse: UNT - news - people ) owners include BP (nyse: BP - news - people ) Exploration (Alaska) Inc., Chevron (nyse: CVX - news - people ) USA Inc. and ConocoPhillips (nyse: COP - news - people ) Alaska Inc.

Exxon Mobil said about 200 million cubic feet of natural gas per day would be produced initially. About 10,000 barrels per day of liquid condensate will then be separated from the gas and shipped through new and existing oil pipelines, while the remainder will be pumped back into the reservoir to maintain pressure.

Exxon Mobil currently produces about 140,000 barrels of oil per day in Alaska.

Exxon Mobil shares fell 71 cents to $86.30 in premarket trading after closing at $87.01 on Tuesday

Oil Jumps on Falling Dollar, Refinery

NEW YORK -

Oil futures shot higher Tuesday, nearing $99 at times as investors bet that crude prices will keep rising despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.

There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000 barrel per day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, and continuing tensions between the U.S. and Venezuela.

Gasoline and heating oil prices appeared to be leading the advance, rising faster in percentage terms than oil due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for weeks.

"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

Light, sweet crude for March delivery rose $2.61 to $98.11 a barrel on the New York Mercantile Exchange after rising as much as $3.28 a barrel earlier. March gasoline jumped 9.14 cents to $2.5852 a gallon, and March heating oil rose 7.68 cents to $2.7237 a gallon.

The dollar fell Tuesday, giving investors another reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

For the moment, investors appear to have put aside concerns about the economy that have sent oil prices down into the mid-$80 range twice since crude peaked above $100 last month. Traders are instead focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country's legal dispute with Exxon Mobil Corp.

OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the U.S., but also threatened to sue Exxon Mobil. The world's largest oil company is fighting Venezuela's nationalization of an oil project, and recently convinved several courts to freeze $12 billion in Venezuelan oil assets.

None of the news is enough to justify a nearly $3 a barrel jump in the price of crude, said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm. Echoing other analysts, Cordier argued that the oil market is in the process of "decoupling" from oil's supply and demand fundamentals. He said investors drawn by the falling dollar and momentum are pushing oil prices sharply higher despite reports last week from the Energy Department, OPEC and the International Energy Agency which all cut oil demand growth predictions for this year.

"Everyone concurs that we've got smaller demand coming in the U.S.," Cordier said.

Retail gas prices, meanwhile, jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher. The Energy Department expects gas prices to peak near $3.40 a gallon this spring.

Other energy futures also rose Tuesday. March natural gas jumped 28 cents to $8.94 per 1,000 cubic feet. Analysts said prices were supported by forecasts for cooler weather, but that futures were also following oil prices higher.

Oil Is Steady After Talk of OPEC Cuts

BANGKOK, Thailand -

Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.

The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world's largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now OPEC have all cut demand forecasts.

Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.

The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don't have plans to stop sending oil to the United States," Chavez said Sunday during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.

But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us." Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela's immense oil reserves. U.S. officials have denied any such plan exists.

The United States relies on Venezuela for about 10 percent of its oil imports.

Chavez's administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.

Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.

Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.

Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.

Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.

Chavez: No Plans to Cut US Oil Exports

CARACAS, Venezuela -

President Hugo Chavez sent a soothing message to American motorists on Sunday, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets last Sunday when he threatened to halt shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don't have plans to stop sending oil to the United States," said the socialist leader during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.

But if the United States "attacks Venezuela or tries to harm us, we will have to make the decision not to send a single drop of our oil to the United States," he added.

U.S. officials have denied planning to attack Venezuela.

The administration of Chavez - a close ally of Cuban leader Fidel Castro - is locked in a legal battle with Irving, Texas-based company over compensation for nationalization of one of four heavy-oil projects in the Orinoco River basin.

Exxon Mobil - the world's largest publicly traded oil company - is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff in the event it wins a decision by an international arbitration panel.

The United States relies on Venezuela for about 10 percent of its oil imports.

Energy Sector Roundup: Crude Inches Up

NEW YORK -

Following is a summary of top stories in the energy sector Friday afternoon.

Oil Hangs On to a Gain

Oil futures settled a little higher, giving up larger earlier gains as traders sold to book profits from crude's recent 10 percent price rally.

Light, sweet crude for March delivery added 4 cents to settle at $95.50 on the New York Mercantile Exchange but alternated frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

March gasoline futures rose 1.77 cents to settle at $2.4938 a gallon on the Nymex, while March heating oil fell 1.97 cents to $2.6469 a gallon. March natural gas lost 11.2 cents to $8.66 per 1,000 cubic feet.

OPEC Revises Outlook for Global Oil Demand

In its monthly oil market report, the Organization of Petroleum Exporting Countries trimmed its 2008 outlook for global oil demand growth and said more cuts in its forecast could lie ahead.

OPEC said slowing economic growth, softer demand for petroleum products and rising crude and gasoline inventories in the U.S. and Europe "warrant close monitoring in the months ahead to ensure a timely response to changing conditions."

OPEC said current production from its member nations is about 32 million barrels a day, which could pad global oil inventories in coming quarters.

The report noted U.S. oil and gasoline stocks are now already above the five-year average following a steady decline in December.

OPEC cut its outlook for 2008 global oil demand growth by 100,000 barrels a day to 1.2 million barrels a day - still an increase of 1.4 percent over last year.

Lehman Sees Refiners Entering a "Dark Age"

Refiners' shares tumbled after a Lehman Brothers (nyse: LEH - news - people ) analyst cut his rating on the sector, suggesting the industry has entered a "dark age" of shrinking margins that could last through the end of the decade.

Analyst Paul Cheng cut his rating on the sector to "Negative" from "Neutral."

"We forecast the sector will resume its downward spiral by early summer and will exit the year below its recent lows," he wrote in a client note.

Cheng noted that U.S. refining margins have dropped by 74 percent since last May. But rather than signal a seasonal pullback, the drop-off seems to herald "a new multiyear down cycle," the analyst said.

The problem, as Cheng sees it, is that demand will not keep up with growing supplies of refined products such as gasoline. "Unless the global demand growth rate exceeds 2 percent per annum for the next several years, we expect supply will outpace consumption growth, which in turn should result in a declining margin environment."

In afternoon trading, shares of Valero Energy Corp. (nyse: VLO - news - people ), the largest U.S. refiner, sank $1.57, or 2.7 percent, to $57.19. Tesoro Corp. (nyse: TSO - news - people ) dropped $1.33, or 3.5 percent, to $36.41, and Sunoco (nyse: SUN - news - people ) fell $1.09 to $60.52.

Transocean (nyse: RIG - news - people ) Ultradeep Rig Hired for Indonesia Project

Transocean Inc. received a 689-day contract for its ultra-deepwater drillship GSF Explorer from a group headed by a Marathon Oil Corp. subsidiary. It will drill exploration wells off Indonesia and should bring Transocean revenue of about $351 million under the deal.

The GSF Explorer is one of 18 ultra-deepwater floater rigs in the Transocean fleet. It can operate in up to 7,800 feet of water.

More Rigs Operating in U.S. and Canada

The number of rigs actively exploring for oil and natural gas in the U.S. this week increased by 18 from the previous week to 1,773. That is 27 more operating than a year ago.

Of the rigs running nationwide, 1,428 explore for natural gas and 339 for oil, according to Baker Hughes Inc. (nyse: BHI - news - people ) Six are listed as "miscellaneous." There are 55 offshore rigs operating.

Among the top petroleum-producing states, Oklahoma added five rigs, Colorado and Louisiana four, Texas three, Alaska two and Wyoming picked up one. New Mexico lost two rigs and California one.

In Canada 632 rigs were in operation, up 34 from the week before.

Eni Gets Compensation Deal with Venezuela

Italian energy company Eni SpA reached a deal with Venezuela for compensation in the 2006 seizure of its Dacion oil field, according to Italian news agencies.

"We obtained compensation at book value," Chief Executive Paolo Scaroni told a news conference.

The Dacion field has an estimated value of $839 million, but Scaroni did not say how much Eni received from the Chavez government.

Exxon Mobil (nyse: XOM - news - people ) challenged state-run oil company PdVSA over compensation for one of its four heavy oil projects in the Orinoco River basin, obtaining court orders that froze up to $12 billion of PdVSA assets. The Venezuelan company retaliated by cutting off crude shipments to Exxon Mobil, a move most analysts think will have little impact on Exxon Mobil.

Exxon Mobil Reserves Replacement Rate Over 100 Percent

Exxon Mobil Corp. says it added the equivalent of 1.6 billion barrels of oil to its known reserves last year, more than replacing the amount it produced.

The company said the added reserves, which drew on drilling programs in North America, the Middle East, Europe and West Africa, totaled 101 percent of its 2007 output.

The total would have included half a billion more barrels were it not for abandoned operations in Venezuela and other asset sales. Exxon Mobil controlled the equivalent of 72 billion barrels of oil at the end of the year.

Eni-Venezuela Deal Reported

ROME -

Italian energy company Eni SpA on Friday reached a deal with Venezuela for compensation for the seizure of its Dacion oil field, Italian news agencies reported, quoting Eni's CEO.

"A few minutes ago we closed a deal with the Venezuelan government on the Dacion oil field, for which we obtained compensation at book value," Eni chief executive Paolo Scaroni was quoted as saying at a news conference near Milan. Dacion, worth an estimated $839 million, was seized in April 2006 by the government of Venezuelan President Hugo Chavez.

Scaroni did not cite the book value.

The ANSA and Apcom news agencies also quoted Scaroni as saying that negotiations aimed at Eni's entering into Venezuela's Orinoco Basin have begun. Last year, Exxon Mobil (nyse: XOM - news - people ) walked away from its heavy oil upgrading operations in the Orinoco River basin after Chavez's government changed the terms of the contract.

Exxon Mobil Corp. is challenging Venezuela's state-run oil company over compensation for the nationalization of one of four heavy oil projects in the Orinoco basin, one of the world's richest oil deposits.

Earlier in the day, Eni, which is 30 percent state-controlled, said preliminary fourth-quarter net profit almost doubled due to its key upstream division and because of stronger crude prices and higher volumes sold following its acquisition spree.

The company said that net profit in the last quarter of 2007 climbed to euro3 billion (nearly US$4.5 billion) compared with euro1.52 billion in the same period a year earlier.

Full-year net profit was up by 8.6 percent, to some euro10 billion (US$15 billion) from euro9.22 billion for 2006.

Eni also said that oil and natural gas production was up by 1.1 percent in the fourth quarter of 2007, but down by 1.9 percent over the entire year.

Eni's U.S.-traded shares were up 84 cents, or 1.3 percent, to $66.05 in late trading Friday on the New York Stock Exchange.

Oil Swings Widely on Conflicting Data

NEW YORK -

Oil futures inched higher Friday, giving up much larger earlier gains, as traders sold to book profits from crude's recent 10 percent price rally.

Volatility was the day's watchword, as prices alternated on mixed news from OPEC and competing views about the economy and demand for oil.

The Organization of Petroleum Exporting Countries trimmed its demand forecasts for this year by 100,000 barrels a day but hinted that it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

"It's always on the mind of traders what OPEC is going to do," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn.

Earlier in the week, prices rose on Venezuelan President Hugo Chavez's threat to cut off oil shipments to the United States in retaliation for Exxon Mobil Corp. (nyse: XOM - news - people )'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets. Exxon has taken Venezuela to court over last year's nationalization of an oil field.

Several reports in recent days have suggested that economic conditions may not be deteriorating as quickly as feared. On Friday, the Federal Reserve said industrial production rose last month in line with analyst expectations. On the other hand, the Energy Department, the International Energy (otcbb: IENI.OB - news - people ) Agency and now OPEC have all cut demand growth forecasts for this year. At the same time, domestic oil supplies have risen for several weeks.

"I think we're just finally coming back down to earth," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

Light, sweet crude for March delivery rose 4 cents to settle at $95.50 on the New York Mercantile Exchange after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

In recent days, many analysts have questioned oil's price strength in the face of falling demand.

"It makes no sense," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J., who suggested speculators may be behind the recent rise. "I think it's financial and it's speculative."

Markets that rise quickly on speculative money often fall even faster, analysts say.

At the pump, meanwhile, gas prices rose 0.5 cent overnight to a national average of $2.984 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, have drifted higher in recent days, following oil's recent rally.

Other energy futures were mixed Friday. March gasoline futures rose 1.77 cents to settle at $2.4938 a gallon on the Nymex, while March heating oil fell 1.97 cents to $2.6469 a gallon. March natural gas fell 11.2 cents to $8.66 per 1,000 cubic feet.