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Crude Oil Finds More Buyers

Chuck Marvin

Crude oil prices were higher again Friday, continuing to take advantage of bullish inventory numbers released during the previous session by the Energy Information Administration.

In Friday trading, light sweet crude oil was 63 cents higher at $61.58 per barrel on the New York Mercantile Exchange. Heating oil was up 3 cents at $1.76 per gallon. Gasoline was a penny higher at $1.76 per gallon.

Natural gas was down slightly at $7.70 per million British thermal units.

On Thursday, the EIA announced that crude oil inventories increased by 3.7 million barrels. While the crude build was larger than analysts had expected, it was counteracted by a decrease in refinery utilization to just over 85%.

The decline in refinery output was caused by several refinery shut-ins and increased maintenance at the facilities, according to a report by Bank of America's equity research division.

The production drop resulted in larger-than-expected withdrawals from gasoline and other distillate inventories, sending energy prices higher, and the effect was carrying over.

Also keeping prices lofty has been Iran's refusal to halt the enrichment of materials that could potentially be used to create nuclear weapons. Fresh posturing by Iranian President Mahmoud Ahmadinejad followed Wednesday's deadline to halt enrichment that had been set by the United Nations Security Council.

From this point forward, investor focus will be on "just how much colder the balance of the U.S. winter will be, and what ... the next round of sanctions [will] consist of now that the [International Atomic Energy Agency] is expected to formally announce later today that the Iranians are in breach of Security Council resolutions," according to a report by Edward Meir, an energy analyst at Man Financial.

Energy stocks were mostly higher. Large integrated oil and gas firms such as BP (BP Quote), Exxon Mobil (XOM Quote) and Chevron (CVX Quote) were all trading to the upside.

Sempra Energy (SRE Quote) was upgraded by RBC Capital Markets from outperform to top pick. Its stock was trading 55 cents higher at $61.

BP Prudhoe Bay Royalty (BPT Quote) was upgraded by AG Edwards to hold from sell, lifting the stock 3.3% at $60.32. Electricity provider Exelon (EXC Quote) was upgraded by Citigroup to buy from hold, and its stock was up 2.1% at $65.60.

Meanwhile, Williams (WMB Quote) was downgraded by RBC Capital Markets to sector perform from outperform. Its stock was down 5 cents at $27.96. Shares of Holly Energy Partners (HEP Quote) fell 2.2% to $45.40 after being downgraded by Credit Suisse to underperform from neutral.

Plains Exploration (PXP Quote) was also downgraded by Credit Suisse to neutral from outperform, and it was given a new target value of $42. The stock was trading 2.1% lower at $47.73.