Crude Posts Late Surge

Updated from 3:30 p.m. EST

A flurry of late buying lifted crude futures to their biggest gain in more than a week Thursday.

December crude settled up $2.03 to $61.78 a barrel, its highest close since Oct. 25. Unleaded gasoline rose 5.77 cents to $1.62 a gallon, while natural gas futures rose 8 cents to $11.69 per million British thermal units. Heating oil rose 5.07 cents to $1.83 per gallon.

Traders said short-covering probably contributed to Thursday's runup. Crude prices have exhibited volatility when crossing the $60 level over the past two weeks.

"Prices are probably going to bounce a little over the next couple of weeks, but we're still looking for the downward trend to continue," said Mike Armbruster, energy analyst at Altavest Worldwide Trading.

A report Thursday showing natural gas inventories up 29 billion cubic feet had little impact on prices.

Armbruster said gasoline demand is still below the year ago level, but it is starting to come back. He suggested the hurricanes in the Gulf of Mexico and high prices as possible reasons for the recent drop in demand.

The recovery of storm-battered refineries in the Gulf of Mexico continues. The U.S. Minerals Management Service said Thursday's shut-in oil production was 957,978 barrels of oil per day, the equivalent of 63.9% of the gulf's daily oil production. Shut-in gas production was 5.043 billion cubic feet per day, the equivalent to 50.43% of the gulf's daily gas production.

Regarding the recent spate of hurricanes, Federal Reserve Chairman Alan Greenspan told Congress Thursday that although the damage from the three storms will probably impede employment and production in the short term, the economy "appears to retain important forward momentum."

"The longer-term prospects for the U.S. economy remain favorable. Structural productivity continues to grow at a firm pace, and rebuilding activity following the hurricanes should boost real GDP growth for a while," Greenspan told the Joint Economic Committee of Congress. "More uncertainty, however, surrounds the outlook for inflation."

In company news, Todco (THE Quote) posted a third-quarter profit Thursday, driven by rising energy-drilling contract day rates. The Houston-based spin-off of Transocean (RIG Quote) earned $19 million, or 31 cents a share, for the third quarter, compared with a loss of $2.5 million, or 4 cents a share, a year ago. Revenue rose to $141 million from $93 million a year earlier, and earnings before interest, taxes, depreciation and amortization hit $55 million, up from $22 million.

Houston-based oil and gas drilling contractor GlobalSantaFe (GSF Quote) posted third quarter net income of $107.6 million, or 44 cents a share, on revenue of $596.6 million, in the latest quarter, compared with income from continuing operations of $60.8 million, or 26 cents a share, a year ago.

Morgan Stanley downgraded offshore drilling company Ensco(ESV Quote) from overweight to equal-weight. And Calyon Securities initiated coverage of Noble(NE Quote) with a buy rating.

Oil and gas distributor Kinder Morgan Energy Partners(KMP Quote) said it had priced a public offering of 2.6 million common units representing limited partner interests at $51.75 a common unit. The company said it granted the underwriter an option to buy up to 390,000 additional common units to cover over allotments. The offering is being underwritten by Morgan Stanley.

Bloomberg reported that the third quarter profit for Canadian energy distributor Enbridge(ENB Quote) fell 62% on a change in the financial reporting period for its gas-utility business and the absence of a gain a year earlier. Net income fell to $59 million or 20 cents a share after payments of dividends on preferred stock. The Calgary-based company also raised its dividend by 15% and said it plans to increase the percentage of earnings paid out in cash based on its expectations of increasing shipments to its people that transports oil to the U.S. Midwest. Enbridge owns the largest crude oil pipeline to the United States.

Williams(WMB Quote) posted a drop in third quarter profit. The Tulsa, Okla.-based gas company said net income was $4.4 million, or 1 cent a share, compared with net income of $98.6 million, or 19 cents a share, from a year ago. Revenue slipped to $3.08 billion from $3.38 billion a year ago. The company said it had experienced losses in its power generating segment.

Shares rose for some of the other big energy market players. ConocoPhillips(COP Quote) was up $1.33 to $68.04. Chevron(CVX Quote) was up 71 cents to $59.23. ExxonMobil(XOM Quote) was up $1.17 to $58.55. Burlington Resources(BR Quote) was up $1.24 to $74.70.