Energy Sector Roundup: Demand Drops

Following is a summary of top stories in the energy sector Tuesday afternoon.

Demand Data Deflates Oil

Oil prices fell more than $3 a barrel, as the market responded to data showing demand falling as supplies rise. Gasoline prices continued their record-breaking press toward $4 a gallon.

The Energy Department said demand for finished petroleum products dropped 8.5 percent in February from January, and demand for gasoline fell by 6.2 percent.

Light, sweet crude for June delivery fell $3.12 to settle at $115.63 a barrel on the New York Mercantile Exchange, oil's lowest settlement since April 17.

Other energy futures followed oil lower. May gasoline futures lost 9.15 cents to settle at $2.9392 a gallon, and May heating oil futures fell 5.23 cents to settle at $3.2465 a gallon. June natural gas futures gave up 48.7 cents to settle at $10.842 per 1,000 cubic feet on the Nymex.

In London, Brent crude futures fell $3.31 to settle at $113.43 a barrel on the ICE Futures exchange.

Gasoline Demand Weakens as Driving Season Nears

A weekly survey by MasterCard SpendingPulse found gasoline demand at the pump last week increased by almost half a million barrels, or 0.8 percent, from the week before.

But compared with the same week last year, demand was down 1.6 percent and is below but near the midpoint of the expected range.

"As the peak driving season approaches, demand for gasoline increases, yet it has generally not increased as much compared to previous years due to high pump prices and sluggish growth in the U.S. economy," said study author Michael McNamara.

McNamara said the four-week moving average shows a year-over-year decline in demand of 1.5 percent.

The survey said the average national retail prices for a gallon of regular gasoline last week rose 13 cents or 3.8 percent. "Gasoline prices are up 20 percent since prices started to rise in early February, while the price of crude has increased more than 30 percent over the same period," McNamara said.

SpendingPulse is a macroeconomic indicator of national retail sales based on aggregate sales activity in the MasterCard payments network, together with estimates for all other payment forms, including cash and check. MasterCard SpendingPulse does not represent MasterCard financial performance.

Survey Finds Pump Prices Top Americans' Money Concerns

Paying for gasoline topped the list of economic worries for U.S. families in a survey conducted for the Kaiser Family Foundation. About 44 percent of survey participants said paying for gasoline was a "serious problem" for them. Across all income levels, the cost of gas was the most frequently cited economic concern.

More than a quarter of households earning more than $75,000 a year described paying for gasoline as a serious problem. For those with incomes of less than $30,000, about 63 percent felt that way.

Running a distant second and third were getting a good-paying job or a raise, and paying for health care and health insurance.

The survey of 2,003 adults was conducted earlier this month.

High Oil Prices Fuel Shell and BP Profits

Record crude oil prices helped BP PLC and Royal Dutch Shell PLC to strong first-quarter earnings.

Shell reported a 25 percent rise in profit to $9.08 billion. The company said combined production of gas and oil equivalents increased by less than 1 percent to 3.4 million barrels per day, as a 9 percent rise in gas production outweighed a 6 percent fall in oil production.

Stripping out the impact of oil inventories, refining profits would have fallen 20 percent, the company said.

Sales at Shell rose 55 percent to $114 billion.

BP posted net profit of $7.6 billion, compared with $4.4 billion in the first quarter of 2007. The jump in net profit and 44 percent rise in revenue to $89.2 billion were well above analysts' expectations.

BP's closely watched replacement cost profit rose 48 percent to $6.59 billion, compared with $4.44 billion in the first quarter of 2007. Some analysts think replacement cost is the best measure of an oil company's underlying performance because it excludes changes in crude inventories value, measuring the amount it would cost to replace assets at current prices.

Replacement cost profit in BP's downstream refining and marketing business improved to $1.25 billion from $804 million in the 2007 quarter.

Citi Investment Research analyst James Neale called the BP results "outstanding."

"Refining and marketing was a surprise positive in the quarter, accounting for 75 percent of the beat, given expectations of a third successive loss in the division.

Still, BP said it was adversely affected by lower U.S. refining margins.

Exxon Mobil Corp. and Chevron Corp. are scheduled to report first-quarter earnings on Thursday and Friday, respectively.

Big Oil Shares Benefit from Upgrade

Some big oil stocks rose as crude prices fell, after BP and Shell reported earnings and Goldman Sachs upgraded the sector.

The Amex Oil Index, a basket of integrated oil companies and refiners, rose by a quarter of a percentage point.

Goldman Sachs lifted its rating on the integrated oil sector to "Attractive" from "Neutral" because of the expected continued strength of global oil prices.

"Within the integrated oil group, we see risk/reward as most favorable for the super majors at this time, with ConocoPhillips our Conviction Buy-rated favorite followed now by Chevron, which has been added to the Americas Buy List," analyst Arjun N. Murti wrote in a note to investors.

ConocoPhillips shares rose $1.10 to $85.54 in afternoon trading. Chevron Corp. shares jumped $2.51, or 2.7 percent, to $95.01.

The investment bank also raised its earnings estimates on a number of oil companies, including Exxon Mobil Corp. and Hess Corp., which both report profits this week.

Exxon Mobil shares fell 31 cents to $92.14. Hess lost $1.43 at $105.85.

Exelon Building Solar Plant in Philadelphia

An Exelon Corp. subsidiary will work with Epuron LLC to build, operate and sell energy from a new solar-power facility plant in South Philadelphia.

The plant will generate about 1.5 megawatts a year from as many as 8,000 solar panels and cost $8 million to $12 million.

The companies say the plant will break ground in the third quarter and should be running by year's end. Epuron will build the plant and Exelon will buy the electricity for the local grid.

Last August, Exelon signed a 20-year power purchase agreement with the U.S. subsidiary of Germany-based Epuron, with plans for a 3,700 megawatt solar facility in Falls Township, Pa., set to begin operations this year.

--Compiled by AP Business Writer Greg Stec. Questions or comments can be directed to gstec@ap.org.