Energy Roundup: No $100 Oil Just Yet

Oil Backs Away from $100

It has not happened yet, but the price of oil seems destined to hit the $100 mark soon, heralding higher gasoline pump prices and rising heating fuel costs.

Oil futures paused in that drive Wednesday after the Energy Department reported that supplies at a key terminal in the Midwest rose for the first time in weeks. Overall crude inventories fell, and distillates -- including heating oil and diesel -- dropped more than expected last week.

Light, sweet crude for January delivery lost 74 cents to settle at $97.29 a barrel on the New York Mercantile Exchange.

Before the inventory report, prices rose as high as $99.29 a barrel in electronic trading to break the previous intraday record of $98.62 set earlier this month.

December gasoline fell 1.44 cents to settle at $2.4371 a gallon. Heating oil futures fell 0.27 cent to settle at $2.6874 a gallon after earlier hitting $2.7154, a new record.

December natural gas rose 7.3 cents to settle at $7.55 per 1,000 cubic feet on the Nymex.

Natural Gas in Storage Continues to Rise

Natural gas in storage in the U.S. grew last week and is about 8.7 percent above the five-year average for this time of year.

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 grew by 4 billion cubic feet to 3.54 trillion cubic feet for the week ending Nov. 16.

The inventory level was well above the five-year average of about 3.26 trillion cubic feet in underground storage, and ahead of last year's storage level of 3.45 trillion cubic feet, according to the government data released a day early due to the Thanksgiving holiday.

U.S. Consumers Waking Up to High Fuel Costs?

A new report from Standard & Poor's says U.S. consumers "have done an amazing job of ignoring high oil prices." But with oil near $100 a barrel, gasoline around $3 a gallon and the home heating season upon us, that may change.

"Consumers will have to offset the increase in the share of their income going to energy with a reduction in other spending," said S&P Chief Economist David Wyss.

Falling home prices compound the problem, Wyss said. Household wealth fueled by home prices gave the average baby boomer the illusion he or she was saving enough for retirement. But declining home prices will pressure people to save more for retirement, he said.

"Because we already expect the U.S. to come very close to a recession, the higher the oil price goes, the more likely recession becomes," Wyss said. "Exactly which straw would break the economy's back will depend on what else happens in capital and foreign markets, but the American consumer can't carry too many more straws."

Speculating on Oil Prices

For some analysts, the question is not "How high will oil go?" but "How far will it eventually drop?" Oppenheimer & Co.'s Fadel Gheit is among those who believe oil's price rise on "good news, bad news, or no news" comes from speculative buying, not fundamentals.

"We believe oil prices are inflated by excessive speculations and think this oil price bubble could get even bigger, until, or unless government regulators step in and put an end to this feeding frenzy, which we think, has gone too far," he wrote in a note to investors.

The analyst also said speculators exaggerate supply concerns to drive prices higher. "Oil supply continues to meet world demand and maintain large inventories. The only meaningful supply disruptions in the last two years were caused by the hurricanes. The longest disruption was in 1990 when Iraq Invaded Kuwait, cutting off more than 4 million barrels per day, which was offset by increased production from Saudi Arabia."

Although a number of analysts have adjusted their oil price forecasts for 2008, Gheit notes the average estimate is $75 per barrel. "Despite the upward revision, the trend remains negative since it implies a sharp decline from the current record of $98 per barrel. Declining oil prices dim the outlook for energy stocks, since their performance usually reflects the direction, not the level, of oil prices."

Cayman Approves GlobalSantaFe-Transocean Tie-Up

GlobalSantaFe Corp.'s planned $53 billion combination with Transocean Inc. received approval from regulators in the Cayman Islands.

Transocean is a Cayman Islands company with corporate offices in Houston.

The two offshore drilling contractors still need authorization from U.K. regulators before the deal can close. Earlier this month shareholders approved the transaction, which is expected to close Tuesday.

Tesoro Prepares Poison Pill

Tesoro Corp.'s board of directors will not make any recommendation to the oil refiner's stockholders about a tender offer from Tracinda Corp., but adopted a shareholder rights plan aimed at preventing a hostile takeover.

To implement the so-called "poison pill" provision, each shareholder of record as of Dec. 3 will receive a dividend of one right for each outstanding share of common stock held, Tesoro said. The rights plan will be triggered if a shareholder takes a 20 percent stake in the company, although not by the successful completion of Tracinda's tender offer.

A poison pill strategy aims to make a hostile takeover prohibitively expensive.

Tracinda, the investment arm of billionaire Kirk Kerkorian, earlier this month began a $1.4 billion tender offer to buy about 16 percent of Tesoro's outstanding shares. Last month, Tracinda offered to buy 21.9 million share for $64 apiece. Tracinda already owns about 4 percent of Tesoro, and the successful completion of the tender offer would increase the company's stake to about 20 percent.

Pemex Platform Spill and Fires Still Not Controlled

Workers are still battling a combination of gas and crude oil leaks, fires and oil slicks at a damaged Pemex oil platform in the Gulf of Mexico.

A month ago, a drilling rig collided with the platform, killing at least 21 workers. Since the accident, the damaged platform has been hit by bad weather, at least three fires, and a constant cloud of toxic gas that has not only prevented crews from carrying out repair work, but also catches fire so easily that six firefighting boats must pump thousands of tons of sea water over the platform to cool the metal and extinguish fires.

Since the accident, the platform has spilled about 430 barrels of oil per day into the Gulf, or almost 13,000 barrels to date.

Allegheny Energy to Offer Wind Program

Allegheny Power, the electric delivery subsidiary of Allegheny Energy, Inc. filed with the Pennsylvania Public Utility Commission to offer a voluntary wind energy program to customers in the state.

Residential, commercial and industrial customers will be able to participate in the program at various levels, with rates starting at an additional $2.50 per month on electric bills.

Allegheny Power will partner with Community Energy, Inc., a wind energy marketer and developer.

Similar programs are offered by utilities in other states, including New York's Consolidated Edison Inc.

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