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Oil Finally Pulls Back

Chuck Marvin

Soaring crude oil futures prices finally tapered off on Friday after seven straight days of gains.

The May light sweet crude oil contract fell 16 cents to finish the week at $65.87 a barrel on the New York Mercantile Exchange. Crude prices rose 5.6% in extremely active trading this week.

Reformulated gasoline fell a penny to $2.12 a gallon. Heating oil edged higher a penny to $1.88 a gallon. Natural gas advanced 12 cents to $7.73 per million British thermal unit.

Crude futures advanced slightly in early trading, induced by more posturing between Britain and Iran over 15 British soldiers captured by the Iranian navy last week. However, oil prices reversed and slid into negative territory in the afternoon.

The European Union took up the British cause, threatening to "take appropriate measures" against Iran if the soldiers are not released. The move was a boost to Britain, which was unable to convince the United Nations to make a similar declaration Thursday night.

While the U.N. expressed "grave concern" over detention of the 15 soldiers, it failed to "deplore" the action or insist on their immediate release as Britain had insisted.

Upward pressure on crude prices generated by the issue is probably tapped out, according to Edward Meir, energy analyst at Man Financial. "If Iran was to hand over the soldiers without the standoff escalating, crude prices would probably fall by $2.50."

Elsewhere, Nigerian presidential candidate and opposition leader Adebayo Adefarati died overnight in a hospital in the Southern coastal region of Ondo. Adefarati, age 76, was the chief of the Alliance for Democracy party. His death is sparking greater uncertainty about the way the April presidential elections will be handled.

According to the 2006 Electoral Act that governs presidential elections in Nigeria, the National Electoral Commission is supposed to "appoint some other convenient date for the election" in the event of the death of a candidate. However, the head of the electoral commission was quick to announce that the presidential elections would be held on April 21 as originally planned.

Violence between the government of current president Olusegun Obasanjo and various rebel groups has escalated sharply since the first of the year. The majority of the violence has occurred in Nigeria's delta region where the country's vast oil and gas producing regions are located.

Rebels have been kidnapping foreigners in the region and holding them for ransom. Obasanjo is flooding the region with troops, in part to restrain the rebels, but also to quash political opposition during his re-election effort.

If violence increases in Nigeria in the weeks leading up to the elections, it will most likely generate further stress on crude supplies, sending prices higher, Meir said.

Meanwhile, energy stocks ended broadly lower. The CBOE oil index slid 1.5% to 654.31.

Chinese oil firm Sinopec marked the country's first integrated refining and petrochemicals joint venture with foreign participation, saying it will collaborate with Exxon Mobil (XOM Quote - Cramer on XOM - Stock Picks) and Saudi Aramco in a $5 billion refinery expansion project. An existing refinery at the site will be expanded from 80,000 barrels a day to 240,000 barrels a day of sour Arabian crude.

Shares of Exxon fell 1% to $75.45.

Among other names in the news, Chevron (CVX Quote - Cramer on CVX - Stock Picks) began to restart its San Francisco Bay refinery in Richmond, Calif. The refinery has been offline since early February for scheduled maintenance. A small fire occurred during the maintenance period, extending the time required for the refinery's overhaul. Shares of Chevron were 1.3% lower at $73.96.

The Federal Energy Regulatory Commission approved El Paso's (EP Quote - Cramer on EP - Stock Picks) proposal to expand its Elba Island LNG facility near Savannah, Ga., saying that the project would have minimal impact on the environment. El Paso plans to increase natural gas storage at the facility to 15.7 billion cubic feet from 8.4 bcf, and also raise the plant's output to 2.1 bcf from 900 million cubic feet. The total expansion will cost El Paso $850 million.

El Paso slipped 1.2% to $14.47.

Friedman Billings upgraded shares of Pioneer Natural Resources (PXD Quote - Cramer on PXD - Stock Picks) to outperform from neutral and upped the stock's price target to $70 from $52.50. Pioneer finished up 3.3% at $43.12.

Newfield Exploration (NFX Quote - Cramer on NFX - Stock Picks) was upgraded by Keybanc Capital Markets to buy from hold. Shares of Newfield were fractionally lower at $41.71.