Energy Sector Roundup: Oil falls on China news

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

Crude Drops Almost $5 a Barrel

Oil prices dropped sharply after China said it will raise fuel prices, a move that could dampen its booming oil consumption.

Crude-oil prices also were given a downward push by the Iraqi Oil Ministry's announcement that it is close to signing oil service deals with several major Western oil companies in an effort to boost crude output.

Light, sweet crude for July delivery fell $4.75 to settle at $131.93 a barrel on the New York Mercantile Exchange.

At the pump, meanwhile, gas prices slipped 0.2 cent overnight to a national average of $4.073 a gallon, according to a survey of stations by AAA and the Oil Price Information Service.

In other Nymex trading, July gasoline futures lost 11.41 cents to settle at $3.3526 a gallon, and July heating oil futures gave up 14.65 cents to settle at $3.7135 a gallon.

China Turns Up Heat on Fuel Prices

China's National Development and Reform Commission said prices of gasoline and diesel oil will rise by 1,000 yuan ($145) per ton to 6,980 yuan ($1,015) and 6,520 yuan ($949), or 16 percent and 18 percent, respectively.

The government hiked fuel prices by about 11 percent in November but kept them frozen at that level, seeking to avoid fanning inflation which has touched 12-year highs since the beginning of the year.

But the policy has led to shortages at the pump as refiners found themselves squeezed by rising oil and gas prices.

Natural Gas Supplies Rise

The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories in the lower 48 states rose by 57 billion cubic feet to over 1.94 trillion cubic feet for the week ending June 13.

The inventory level was slightly below the five-year average of about 2 trillion cubic feet and well below last year's storage level of 2.32 trillion cubic feet.

July natural-gas futures fell 34.9 cents to settle at $12.861 per 1,000 cubic feet on the New York Mercantile Exchange.

Goldman Upgrades Oilfield Services

Goldman Sachs upgraded the oilfield services sector to "Attractive" from "Neutral," predicting strong profit growth due to greater drilling activity and high oil prices.

Analyst Charles Minervino expects earnings to grow in the double digits through 2011 as high oil prices lead to more rapid rig construction, and both drilling activity and the rates oil companies pay for drilling will increase.

Minervino raised price targets throughout the sector, and said deep water drillers Transocean Inc., Diamond Offshore Drilling Inc. and Pride International Inc. will get higher rates. He also favors land services that do a significant amount of business in North America, including Halliburton Co., Nabors Industries Ltd. and Helmerich & Payne Inc.

He said Schlumberger Ltd. will benefit from higher spending and rig counts.

Shares in the sector fell Thursday along with the price of oil.

Evergreen Solar Sails Higher on New Contracts

Shares of Evergreen Solar Inc. shot up after the solar panel producer signed two long-term sales contracts.

Evergreen rose $2.06, or 20.1 percent, to close at $12.30.

Lehman Brothers analyst Vishal Shah raised his target price on the stock and predicted his Wall Street colleagues will soon raise their earnings forecasts for the company as well. That move added fuel to a rally that extended a week of gains.

The contracts with White River Junction, Vt.-based groSolar and Germany's Wagner & Co Solartechnik GmbH announced late Wednesday run through 2012 and have a combined value of about $600 million.

Coal Production Down

The Energy Information Administration says data on railroad car loadings shows U.S. coal production totaled about 21.3 million tons during the week ended June 14. The estimate is 2.4 percent lower than the previous week, and 6.6 percent lower than the estimate reported for the comparable week in 2007.

Production east of the Mississippi River totaled 9.2 million tons, and production west of the Mississippi totaled 12 million tons.

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