Energy Sector Roundup: Crude Futures Sink

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

Crude Beats a Retreat

Oil prices fell as much as $6 a barrel, sending crude back to levels not seen since June 26 as traders wary about the health of the global economy cashed in gains from oil's recent rally.

A barrel of light, sweet crude for August delivery fell $5.33 on the New York Mercantile Exchange to settle at $136.04.

The market's bearish turn erases, at least for the time being, the effect of a rally that pushed prices past $145 in a string of record-setting sessions before the Fourth of July.

Analysts attributed much of the recent sell-off to profit-taking, saying traders cashed in on the previous week's gains. A stronger dollar also helped keep prices lower by discouraging investors from pumping more money into commodities.

In other Nymex trade, heating oil fell 14.94 cents to settle at $3.8202 a gallon, and gasoline futures sank 11.96 cents to settle at $3.3631 a gallon. Natural gas futures dipped by 60.9 cents to settle at $12.368 per 1,000 cubic feet.

Government Raises Oil and Gas Price Forecasts

The Energy Department raised its outlook for the average price of a barrel of crude and a gallon of gasoline this year.

The Energy Information Administration's Short-Term Energy Outlook now say oil will average $127 a barrel this year, up from the $122 a barrel forecast in last month's report. The EIA expects gasoline to average $3.84 a gallon _ more than $1 above the 2007 price. That's up from $3.78 a gallon last month.

The EIA also trimmed its demand forecast, seeing global consumption growing by 900,000 barrels per day this year, versus 1 million barrels a day in the June report. U.S. consumption is now seen dropping by 400,000 barrels a day. Last month the decline was pegged at 290,000 barrels per day.

The forecast for the average price of natural gas rose as well from last month's report _ to $11.86 per 1,000 cubic feet from $11.

Demand at the Gas Pump Weaker

Gasoline demand at the pump fell 1.2 percent last week compared with the previous week and was down 3.9 percent from the same week a year ago, according to a survey by MasterCard SpendingPulse.

Retail prices for a gallon of regular rose 2 cents on average across the nation and now are 37.8 percent higher than a year ago, and $1.02 per gallon higher than at the beginning of the year. This compares with a 65 percent rise in the average price per gallon over the first half of 2007.

Study author Michael McNamara said unfavorable weather limited demand to some degree. "There was wet weather, or the threat of it, across much of the country. That of course discourages beachgoers," he said.

McNamara also said the decrease in demand at the pump appeared to be more consistent throughout the week recently, rather than concentrated around weekends, as it was in the spring.

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.

ConocoPhillips Production Falls

ConocoPhillips says its global production fell as expected in the second quarter because of planned maintenance, but it benefited from higher oil and natural gas prices.

In an overview of market conditions for the April-June period, ConocoPhillips also said its worldwide refining margins in the second quarter probably improved from the first quarter. But the company said the improvement was offset by lower margins for "secondary" refined products such as fuel oil, natural gas liquids and petroleum coke.

Global marketing margins for the second quarter are expected to be lower than the first, primarily due to market prices lagging increases in expenses.

In recent quarters, higher crude costs have squeezed profits at the refining arms of companies like ConocoPhillips, which don't produce enough crude themselves to satisfy their refining operations and have to buy supplies at market prices. and what the company makes on refined products such as gasoline.

ConocoPhillips is scheduled to report second-quarter earnings July 23. Its shares fell $1.09 to $89.27 in afternoon trading.

Pickens Says He Has a Plan

Texas oilman T. Boone Pickens opened a media campaign he hopes will help solve the nation's energy crisis.

The former wildcatter, who now heads the Dallas-based hedge fund BP Capital Management LP, outlined his concerns and some proposed solutions in New York.

Under "The Pickens Plan," thousands of wind turbines would be constructed across the nation's wind belt, from Texas to the Canadian border, that he says will eventually generate enough power to meet 20 percent of the nation's electricity needs.

Last year, Pickens announced plans to build the world's largest wind farm in Texas. The cost of the project could grow to $12 billion before its scheduled completion in 2014.

He also wants more natural gas to replace most imported oil used to make gasoline and diesel.

PetroQuest Narrows Production Guidance

PetroQuest Energy Inc. narrowed its second-quarter production guidance to the lower part of its previous range, blaming lower-than-expected Gulf Coast production.

PetroQuest Energy now expects its second-quarter production to average between 91 million and 94 million cubic feet of natural gas equivalent per day.

The company said in May that daily production would average between 91 million and 97 million cubic feet of natural gas equivalent.

Jefferies & Co. analyst Subash Chandra expects PetroQuest will revise its full-year production outlook when it releases second-quarter earnings.

Energy Conversion in Solar Deal with GM

Energy Conversion Devices Inc. will supply solar cell laminates to General Motors Corp. for the world's largest rooftop power generation system.

Financial terms of the deal were not disclosed.

The company's UNI-Solar thin-film flexible solar laminates will be installed this fall at a 2 million-square foot car plant in Figueruelas, Zaragoza, Spain.

The rooftop system will have about 85,000 solar panels and peak capacity of 12 megawatts _ enough electricity to power 4,575 homes, GM said.

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