Energy Prices End Mixed

Updated from 2:51 p.m. EDT

Energy prices ended mixed on Monday, as traders remained cautious ahead of the winter heating season.

After falling 7% last week, crude for November delivery lost 4 cents to $61.80 a barrel.

"It's showing a lot of resistance," said Paul Boland, an analyst at Alaron Trading. "There's a lot of buying going on."

Heating oil closed up 1.74 cents to $1.97 a gallon, while natural gas finished down 11 cents to $13.12 per million British thermal units. Gasoline was off 1.67 cents to about $1.81 per gallon.

Energy-related stocks fell, with the Philadelphia Stock Exchange Oil Services Index and the Amex Oil Index falling about 1%. Both proxies lost about 8% last week.

Exxon(XOM Quote) shares fell 1.8%; Conoco(COP Quote) was off less than 1%; Halliburton(HAL Quote) lost 2.7% and Sunoco(SUN Quote) fell 2.2%.

Phil Flynn, senior market analyst at Alaron, said the markets are in a "shoulder season" right now, where the summer is over and the winter demand for heating oil has not yet begun.

The U.S. Energy Department said fuel consumption has been down in the past month compared to the same period a year ago. Gasoline demand has been down largely due to high gasoline prices, analysts believe.

"We're starting to hear this mantra that demand is going to be gone forever," Flynn said. "It's a little ridiculous, but it comes with the season. This talk of demand destruction is way overblown. Once we get into the winter season ... prices are going to go back up."

The U.S. continued to assess the impact of Hurricanes Katrina and Rita. On Friday, the Minerals Management Service said shut-in oil production in the gulf was 1.2 million barrels of oil a day, the equivalent of 77.5% of the gulf's daily oil production. Shut-in natural gas production was 6.441 billion cubic feet per day, the equivalent of 64.4% of the gulf's daily gas production.

In company news, Burlington Resources(BR Quote) said it expects third-quarter daily production to fall within the lower part of its announced guidance range of 2,800 to 3,000 million cubic feet of natural gas equivalent per day, mostly due to the storms in the Gulf of Mexico. The company said it restored most of the production immediately curtailed after Hurricane Rita and was working to restore the 2% of total production volume that is currently shut in.

A.G. Edwards upgraded GlobalSantaFe(GSF Quote), an offshore oil and gas drilling company, from hold to buy.

Reuters, citing a filing with state regulators, reported on Monday that Valero Energy(VLO Quote) will restart two sulfur recovery units at its 250,000 barrel-per-day refinery in Port Arthur, Texas. The company said it would begin restarting the SRU-544 and SRU-545 units at the refinery which sustained significant damage when Hurricane Rita struck on Sept. 24. The restart is expected to take a week.

Chevron(CVX Quote) said it is developing the Blind Faith Field in the deepwater Gulf of Mexico. First production is expected during the first half of 2008. Total capital costs will be about $900 million. Chevron is the operator and holds a 62.5% working interest. Kerr-McGee(KMG Quote) is a partner in the project and holds a 37.5% interest. Chevron said initial production is expected to be about 30,000 barrels of oil per day and 30 million cubic feet of gas per day.

Noble Energy(NBL Quote) said it resumed operations in the Gulf of Mexico. Total net production is about 10,000 barrels of oil equivalent per day, roughly a third of its production rate prior to Hurricane Katrina. The company said it expects third quarter production to increase 58%, but still fall below expectations because of the hurricane activity in the gulf. Production for 2005 is expected to increase about 36% compared to full year 2004.