Updated from 1:09 p.m. EDT

Crude prices regained lost ground and closed higher Thursday, spurred by news on a refinery shutdown and by rallying gasoline prices.

The new June crude benchmark closed up 17 cents at $54.20 a barrel. Gasoline futures gained about 4 cents to $1.61 a gallon.

A piece of equipment used to make gasoline at the

ConocoPhillips

refinery in Lake Charles, La., failed to restart after coming out of maintenance,

Reuters

reported. The refinery produces 255,000 barrel-per-day.

"This is what probably caused gasoline prices to rally and crude prices followed," said Lee Fader, Energy broker at ABN Amro. "It's the same old story of concerns over refining capacity."

Fed chairman Alan Greenspan warned on Thursday that the economy was at risk of stagnation "or worse," because of a growing U.S. deficits. Robust economic growth in the U.S. and an accelerated demand for energy contributed to the recent rally in oil prices.

The Energy Department said Wednesday that crude oil inventories fell by 1.8 million barrels last week, the first decline in nine weeks and a surprise to analysts that expected a climb of about 1.4 million barrels. Gasoline fell by 1.5 million gallons, more than the expected 275,000 decrease.

Crude stocks remain at their highest levels in three years, at 318.9 million barrels, up about 23 million from a year ago. Still, the cushion isn't easing fears that there isn't enough oil to keep the global economy fueled. According to

Reuters,

President Bush plans to ask Saudi Arabia's leader Crown Prince Abdullah at their meeting next week for "a clear answer from the Saudi government about the size of its spare oil production capacity."

Saudi Oil Minister Ali al-Naimi said on Thursday that OPEC is less capable of controlling price rises because of market speculation and refinery bottlenecks in consuming nations,

Reuters

reported. But the cartel will work to keep its spare supply capacity of at least 1.5 million barrels per day, he said.

On Wall Street, analysts and investors are buzzing with anticipation ahead of next week's oil and gas companies' earning reports. The expectation is for a big increase in earnings across the board. Because annual and quarterly guidance has been pegged on oil prices being in the range of $40-$50 a barrel -- and because oil prices were higher than that during much of the first quarter -- high margins are the words of the day in the energy sector.

Dan Barcello, an analyst at Bank of America, expects an average 37% year over year increase in EPS from the integrated oil group, as the sector "continued to benefit from soaring oil prices in the quarter," he said in a note. He estimates

Exxon Mobil

(XOM) - Get Report

will post 54% increase in earnings per share, and a 43% jump for

ConocoPhillips

(COP) - Get Report

.

The poorest performer for the quarter, according to Barcello, is likely to be

Amerada Hess

(AHC) - Get Report

. He expects a 27% year over year decrease in earnings as a result of "heavy expensing of unsuccessful exploration during the quarter and its hedging program."

Lysle Brinker, an analyst at John S Harold, said earnings should do "very well," driven by high profit margins from upstream operations. He notes that Exxon Mobil will increase its annual earnings to $4.75 a share in 2005, compared to $4 in 2004, a 19% jump.

On the buy side, Brian Hicks, a portfolio manager who manages $520 million for the U.S. Global Resources fund in San Antonio, continues to see supply and demand fundamentals as very tight and expects a ramp up in demand in the fourth quarter. Hicks estimates that integrated oil stocks will realize a 35% year over year increase.

"We will also see a lot of upside at oil service companies and land drillers," he said, such as

Patterson-UTI Energy

(PTEN) - Get Report

. "The Integrated companies are generating huge cash flows, they will spend it on more drilling and it will also trickle down to service companies such as

Halliburton

(HAL) - Get Report

, and

Baker Hughes

(BHI)

," Hicks said.

In company news Thursday,

Valero Energy

(VLO) - Get Report

, a gasoline refiner comfortably exposed to higher refining margins due to its ability to refine lower-grade and heavier oil, said Thursday that its net earnings for the first quarter more than doubled from a year ago to $534 million, or $1.92 per share. This, however, came in a little shy of the $1.97 estimated by analysts, according to Thomson Financial. Shares rose 66 cents, or 0.90%, to $74.15.

Noble

(NE) - Get Report

also reported higher earnings Thursday, in line with analysts expectations. The provider of offshore drilling equipment to the oil and gas industry made $45.5 million, or 33 cents a share, on operating revenue of $310.3 million. This compares to net income of $28.3 million, or 21 cents a share, on operating revenue of $245.4 million for the first quarter of 2004. Shares rose $1.01, or 1.90%, to $54.22.

FMC Technologies

(FTI) - Get Report

, the rig equipment and solutions provider, won a $276 million contract to supply subsea systems for the ChevronTexaco-operated Agbami project, offshore Nigeria. Shares climbed $1.06, or 3.44%, to $31.91.

Although it reported a first quarter loss,

McMoran Exploration

managed to beat analysts expectation by lessening losses by about two thirds. The New Orleans, LA.,-based oil and gas exploration company said it had a net loss of $5.7 million, or 24 cents per share, compared to a net loss of $13.3 million, or 78 cents per share, in the same time a year ago. This significantly exceeds analysts mean estimate of a 48 cent loss, polled by Thomson Financial. Shares jumped 77 cents, or 4.05%, to $19.76.

Shares of most major oil producers staged a mild rally late Thursday. Exxon Mobil rose $1.40, or 2.45%, to $58.54;

ChevronTexaco

(CVX) - Get Report

increased $1.06, or 2.04%, to $53.11;

Royal Dutch/Shell

(RD)

jumped 40 cents, or 0.68%, to $59.20;

ConocoPhillips

(COP) - Get Report

climbed 93 cents, or 0.90%, to $104.20; and

BP

(BP) - Get Report

rose 41 cents, or 0.68%, to $60.41.