Energy Sector Roundup: Crude oil settles lower

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

Oil Down After Volatile Session

Oil futures ended a whipsaw session slightly lower, as the expiration of options played havoc with prices, driving crude near record high levels at times and down by more than $3 a barrel at others. Retail gas prices, meanwhile, advanced past $3.77 a gallon.

Options let investors bet oil prices will rise or fall in the future. Oil prices can fluctuate widely on days when options expire, analysts said.

Light, sweet crude for June delivery lost 10 cents to settle at $124.12 a barrel on the New York Mercantile Exchange after rising as high as $126.64 earlier in the session, and falling as low as $120.75 later in the day.

In other Nymex trading, June gasoline futures fell 1.46 cents to settle at $3.1658 a gallon, and June heating oil futures rose 0.46 cent to settle at $3.6224 a gallon.

Fewer to Hit the Road Memorial Day Weekend

High fuel prices are prompting many Americans to rethink Memorial Day travel plans, according to AAA.

The automobile club projects that the number of Americans traveling more than 50 miles from home over the long holiday weekend will fall nearly 1 percent from last year.

About 31.7 million Americans plan to travel via car over Memorial Day weekend, a 1 percent decline from 32 million last year. About 4.35 million will travel by plane, a decline of about half a percent from the 4.37 million who flew last year. Another 1.8 million will travel by train, bus or other transportation.

Natural Gas Supplies Grow

The Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states rose by 93 billion cubic feet to about 1.53 trillion cubic feet for the week ended May 9.

The inventory level was slightly above the five-year average, but well below last year's storage level of about 1.82 trillion cubic feet, according to the government data.

Natural gas for June delivery fell 19.9 cents to settle at $11.399 per 1,000 cubic feet on the New York Mercantile Exchange.

Pickens Puts Billions into Wind Power

Mesa Power, a renewable energy company founded by billionaire Texas oilman T. Boone Pickens, placed an order for 667 wind turbines from General Electric Co. as part of a $2 billion startup of what is slated to become the world's largest wind farm.

"You find an oilfield, it peaks and starts declining, and you've got to find another one to replace it," Pickens said in a statement. "With wind, there's no decline curve."

Mesa plans to install the turbines in the Texas Panhandle, a sparsely populated region that the company said is a "logical location" for wind-generated power. Electricity produced by the turbines is expected to come online by early 2011.

The entire four-phase project is forecast for completion in 2014. It will eventually have 4,000 megawatts of capacity.

The turbines can each produce 1.5 megawatts of electricity. That makes the project's first phase capable of producing a total of 1,000 megawatts, or enough energy to power more than 300,000 average U.S. homes, the company said.

Energy Shareholders Benefit from Consolidation

A new study from consultants Wood Mackenzie finds consolidation in the energy industry tends to boost shareholder value rather than diminish it.

The report analyzed the strategy used and value created in deals completed by 38 companies between 2001 and 2006. The companies included major oil companies, independents, Asian national companies and Russian players.

The 195 transactions examined created a total of $204 billion in shareholder value with another $34 billion generated from discovered resources.

Some 84 billion barrels of oil equivalent were acquired in the deals.

The report also points out that significant returns do not happen overnight. "In the current environment of increasing prices and increasing costs, it has taken on average three years for deals to achieve returns in excess of 15 percent, with returns generally increasing the longer the asset is held, such deals benefiting from the rise in commodity prices."

The study goes on to say that Russian deals generated the highest average returns, although international participants were excluded from a number of those transactions. Better returns came from near-term production than from longer-term exploration projects, and asset deals did better than corporate deals.

Trina Signs Polysilicon Contract

Trina Solar Ltd. signed a long-term polysilicon supply agreement with Jupiter Corp. Ltd., an affiliate of DTK Industries (Qingdao) Co., Ltd.

Both companies are based in China.

Qingdao DTK will supply Trina Solar with enough polysilicon to make about 650 megawatts of solar modules over six years. Delivery of polysilicon at predetermined prices is expected to start in the third quarter of 2009.

Polysilicon is a key component of solar wafers and panels. Solar companies try to lock in prices on it to avoid paying higher spot prices to meet their production needs.

Trina Solar shares rose 58 cents to $46.22 in afternoon trading.

Gazprom in Canadian LNG Terminal Deal

A U.S. subsidiary of Russia's state-controlled natural gas company signed a letter of intent to obtain all the capacity of a liquefied natural gas (LNG) terminal planned for Quebec.

The export subsidiary of OAO Gazprom reached a deal with its partners in the Rabaska terminal project to become an equity partner in the venture.

The partners are Canada's Gaz Metro LP and Enbridge Inc. and France's Gaz de France.

Gazprom aims to make North America a prime market for liquefied natural gas from the vast Shtokman field in the Arctic.

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