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Energy Rises With Broader Market

The June contract for light sweet crude closes up $1.29, at $65.84 a barrel.

Energy futures ended Wednesday's trading session broadly higher after the Energy Information Administration reported new inventory figures that took analysts by surprise.

The June light sweet crude contract climbed $1.29 to close at $65.84 a barrel on the New York Mercantile Exchange. Reformulated gasoline jumped 6 cents to $2.28 a gallon. Heating oil rose 5 cents to $1.90 a gallon.

The near-term natural gas contract edged 9 cents higher to $7.69 per million British thermal units.

The EIA startled traders by lowering last week's refinery utilization rate from 90.4% to 87.8%. Analysts at Bloomberg were expecting an increase in refinery utilization to 90.9%

The drop in utilization was surprising, because refineries are usually bringing units on line after spring maintenance and increasing their output of refined products in late April. "Refinery numbers always get higher this time of year," says Dennis Gartman, publisher of

The Gartman Letter

. "Today's adjustment was very odd. It was a big slip."

The slide in utilization was likely due to refiners being cautious as they restart segments of their plants, rather than because of refinery fires or other serious accidents, according to Kyle Cooper, director of research at IAF Advisors in Houston.

Because of the lower utilization figures, refineries purchased less crude oil and produced smaller amounts of products such as gasoline than analysts were expecting last week.

Crude inventories grew by 2.1 million barrels, whereas analysts at Bank of America were expecting a 2-million-barrel draw. Gasoline inventories fell by 2.8 million barrels from the previous week, as opposed to the 200,000-barrel draw that analysts were expecting. Distillate inventories were flat, vs. a 700,000-barrel injection expected by analysts.

The near-term gasoline contract jumped nearly 3% on today's news, surpassing its highest price since Aug. 15, 2006.

Global Factors

Meanwhile, reverberations from last weekend's presidential elections in Nigeria continued to support crude prices today. Democracy watchdog groups are calling the election "highly compromised." Oil unions are talking of going on strike in protest of the outcome, in which Umaru Yar'Adua -- a protege of the nation's sitting president, Olusegun Obasanjo -- was elected, according to Gartman.

"Nigeria's unions frequently call strikes, but they tend to be short-lived and poorly attended," Gartman says. "Crude prices usually jump when strikes are called, but then fizzle out."

Also supporting crude prices is the announcement that China will begin to increase the size of its strategic oil reserve by the end of May. China currently has about 15 days' worth of crude oil in its reserve. It plans to increase this gradually to a 90-day supply. This process will likely take years.

"When the U.S. recently added to its strategic reserves, crude prices consistently advanced. As soon as we stopped, prices fell. Expect a similar trend to occur as China builds its reserves," Gartman says.

Energy Stocks in Motion

Energy stocks moved strongly to the upside today, energized by the jump in commodity prices. The CBOE Oil Index soared 2.2% to 696.66.

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(CVX) - Get Chevron Corporation Report

moved $1.22 higher to $78.32.

Exxon Mobil

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advanced $1.32 to $79.92.


(COP) - Get ConocoPhillips Report

announced that its net income rose 7.7% in the first quarter to $3.55 billion, from $3.29 billion a year ago. Earnings per share came in at $2.12 a share, down from $2.34 a year ago. The EPD figure inlcudes 29 cents a share for the one-time sale of assets. Conoco's earnings fell 3 cents short of analyst estimates. However, its stock climbed $1.18 to $70.82.


(HES) - Get Hess Corporation Report

announced today that its first-quarter income fell to $370 million, or $1.17 a share, from $699 million, or $2.22 a share, during the same period a year ago. However, the loss was in line with analyst estimates. Hess' management blames the drop in natural gas prices during the first quarter of 2007 for the decline in earnings. Shares of Hess rose $1.92 to $59.04 in today's session.

Baker Hughes


announced this morning that its first-quarter profits rose 10.5%, lifting its stock 7.8% to $78.51.

Sun Trust Robinson Humphrey upgraded shares of

Whiting Petroleum

(WLL) - Get Whiting Petroleum Corporation Report

to neutral from reduce and

St. Mary Land & Exploration

(SM) - Get SM Energy Company Report

to buy from neutral. Whiting rose $2.23 to $43.85, while St. Mary gained $1.26 to $37.84.

DTE Energy

(DTE) - Get DTE Energy Company Report

was upgraded by Credit Suisse to neutral from underperform. Its shares rose $1.32 to $51.44.

CIBC World Markets downgraded shares of tubular-steel manufacturer



to sector perform from sector outperform. Ipsco announced last week that it is being courted by an unnamed company for a possible buyout. Ipsco's stock closed lower by 23 cents, at $151.25.

Sunoco Logistics Partners


was downgraded by Lehman Brothers to underweight from overweight. Sunoco lost 37 cents to $60.40.