Energy Sector Roundup: Iran Pushes Oil Near $127

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

Iran Anxiety Sends Oil to New High

Oil prices shot to a new record near $127 a barrel on worries that Iran might cut crude oil production. Gasoline rose to a new record over $3.73 a gallon, and its advance showed little sign of slowing ahead of the Memorial Day weekend, the traditional start of the summer driving season.

Light, sweet crude for June delivery rose to $126.98 a barrel in midday trading on the New York Mercantile Exchange before retreating to settle at $125.80, up $1.57 for the day.

Iranian officials denied reports the oil-rich nation is ready to cut production, while some analysts said the country's economy is in bad shape and cannot afford to lose any oil money.

In other Nymex trading, June gasoline futures rose 3.58 cents to settle at $3.20 a gallon, and June heating oil futures gained 13.91 cents to settle at $3.6989 a gallon after earlier rising to a record $3.7146. Natural gas futures added 12.1 cents to settle at $11.422 per 1,000 cubic feet.

IEA Sees Slower Growth in Oil Demand

The International Energy Agency, an adviser to mostly western, industrialized nations, said high prices are cutting demand for oil and petroleum products in the U.S. and Europe. The IEA cut its global oil demand growth forecast for this year to 1.2 percent from 1.5 percent. In the U.S., the IEA said demand for oil may contract by as much as 2.1 percent this year, while demand for gasoline will drop by about 1 percent.

Gasoline Pump Demand Down

A survey by MasterCard SpendingPulse found gasoline demand at the pump fell 0.6 percent last week compared with the week before.

Compared with the same week a year ago, demand was down 7 percent. Study author Michael McNamara said the seasonal lift in gasoline demand that normally occurs around this time of year seems stalled, possibly because of record high gasoline prices and the sluggish U.S. economy.

McNamara said in a telephone interview that the week-to-week drop in demand was surprising, since demand usually rises with the approach of the summer driving season.

"It looks like consumer behavior is changing. Higher gasoline prices are really putting a dent in the year-over-year numbers as well," 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.

Senate Wants to Stop Filling Strategic Reserve

The Senate voted to temporarily halt the shipment of thousands of barrels of oil a day into the government's Strategic Petroleum Reserve.

Both Democrats and Republicans said the shipments make no sense when oil costs over $120 a barrel and could better be used to add supplies to a tight market and help keep prices down.

"We are buying the most expensive crude oil in the history of the world and storing it," said Sen. Byron Dorgan, D-N.D. "When American consumers are burning at the stake by high energy prices, the government ought not be carrying the wood."

For the measure to become law, both the House and Senate must pass the emergency reserve directive and President Bush sign it _ or Congress must enact it over a presidential veto.

Prospects for Solar Credits Boost Shares

Nothing but blue skies for shares of many solar products makers, as a Citi Investment Research analyst said prospects look good for continuation of government solar tax credits.

Analyst Timothy M. Arcuri said in a client note that his "contacts indicate the House Ways and Means Committee is likely to propose a new bill that will extend most of the credits for at least several years _ longer than the one-year extension that has been discussed to date. The House is hoping to pass a bill before the Memorial Day recess."

Even if a bill appears this week, it must still be voted on by the full House and sent to the Senate, where there is no guarantee it would pass without meaningful revision, the analyst wrote.

Canadian Solar Inc. shares took off after first-quarter earnings beat Wall Street estimates. The stock hit a new high of $45.08 before settling at $40.78, up $6.68, or 19.6 percent, for the day.

Energy Conversion Devices Inc. rose $3.58, or 6.9 percent, to $55.20; SunPower Corp. added $4.60, or 5.5 percent, to $89; and First Solar Inc. rose $19.14, or 6.7 percent, to $303.98.

Quake May Crimp China's Solar Operations

Calyon Securities analyst George Kotzias warned investors some clouds may be on the horizon for Chinese solar companies following the devastating earthquake in that country.

He noted that the epicenter of the 7.9 magnitude quake is near one of China's main polysilicon production areas. Polysilicon is a crucial component for solar products. Kotzias says the plants themselves appear structurally sound, but power disruptions could interfere with production.

"Solar investors may want to seek safety in U.S. names until more clarification of the situation in China is reached," he said.

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