Energy Midday Roundup: Gas in Storage Up

Natural Gas Inventory Expands

Natural gas in storage in the U.S. grew last week and is about 12 percent above the five-year average for this time of year, a government report said Thursday.

The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories held in underground storage in the lower 48 states increased by 43 billion cubic feet to about 2.97 trillion cubic feet for the week ending Aug. 24.

The inventory level was well above the five-year average of more than 2.65 trillion cubic feet in underground storage, and also above last year's storage level of 2.90 trillion cubic feet, according to the government data.

Natural gas for October delivery rose 2.2 cents to $5.603 per 1,000 cubic feet on the New York Mercantile Exchange.

Oil Slides as Pump Prices Rise

Energy futures were buffeted by slower-than-expected economic growth figures and Wednesday's government report of a sharp decline in oil and gasoline inventories.

Selling by investors to lock in profits from the previous day's rally also pressured prices, analysts said.

Gas prices at the pump climbed again overnight. Retail prices, which typically lag the futures market, are rising as retailers buy gasoline to supply drivers over the coming Labor Day weekend.

Light, sweet crude for October delivery rose 4 cents to $73.56 a barrel on the New York Mercantile Exchange, while September gasoline fell 2.9 cents to $2.0720 a gallon. Both contracts alternated between gains and losses.

In other Nymex trading, heating oil futures fell 0.3 cent to $2.0389 a gallon.

Lehman Upgrades Aventine and VeraSun

A Lehman Brothers analyst upgraded shares of ethanol producers Aventine Renewable Energy Holdings Inc. and VeraSun Energy Corp., saying flat corn prices, impending alternative energy legislation and a narrower spread between the cost of ethanol and gasoline could lift the shares as much as 50 percent in the next three months.

Both stocks are trading near annual lows, with VeraSun shares down 24.8 percent since July 11, and Aventine shares off 25.3 percent.

Ethanol producers have been weaker than the broader market over the last month, said analyst Mansi Singhal, who upgraded the sector to "Positive" from "Neutral," and raised his ratings on Aventine and VeraSun to "Overweight" from "Equal Weight."

The analyst has a price target of $20 per share on Aventine stock, and $17 per share on VeraSun. Aventine traded around $14.22 at midday. VeraSun was at $12.93.

"We think the downside risk may be limited to only 10 to 15 percent, while the upside potential could be as high as 30 percent to 50 percent over the next three months," Singhal wrote in a note to clients.

Crosstex to Build New Pipeline

Crosstex Energy LP, which operates a natural gas pipeline and processing plants, will build an $80 million natural gas pipeline to provide increased access to one of the largest natural gas fields in the U.S.

The 29-mile pipeline will aim to boost capacity for natural gas producers in the Barnett Shale formation in Johnson County, Texas.

Deliveries are expected to begin in the third quarter, with construction set to be completed in the second quarter of 2008.

Crosstex anticipates full capacity by 2009.

Air Safety Pack Thefts Trouble Coal Mines

Coal miners are facing a new and apparently growing safety threat: the theft of emergency air packs.

Authorities say the devices have been disappearing from mines, particularly in West Virginia, the nation's largest producer of underground coal.

Government regulations have forced the industry to store tens of thousands of extra air packs in unlocked, unguarded boxes underground so they will be readily accessible to escaping miners in an emergency.

The thefts come at a time when manufacturing backlogs have created a desperately short supply of air packs, or self-contained self-rescuers. Mine operators have taken delivery of 86,000 air packs and are awaiting 100,000 more to meet government mandates adopted after the Sago Mine explosion and other deadly disasters.

Authorities say it's tough to quantify the extent of the problem, but the thefts appear to be growing.

Richmond, Va.-based Massey Energy Co., the nation's fourth-largest producer by revenue, says it has lost at least 100 to 200 air packs, which sell for more than $800 each.

FirstEnergy Challenging Court on Recouping Fuel Cost

Electric company FirstEnergy Corp. will challenge the Ohio Supreme Court's decision preventing the company from recouping excess fuel generation costs from customers, according to a regulatory filing.

The Public Utilities Commission of Ohio (PUCO) granted a request from the utility that it be allowed to pass on the costs to users through 2034, but justices voided the plan on Wednesday and sent it back to regulators for adjustments.

In a filing with the Securities and Exchange Commission, FirstEnergy said it intends to file a motion for reconsideration to contest the court's interpretation of the plan. At the same time, FirstEnergy plans to file an application with PUCO in response to the court's opinion, laying out a plan for recovery.

FirstEnergy's seven electric utility operating companies comprise the nation's fifth largest investor-owned electric system, serving 4.5 million customers.

--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to .