Business news briefs for September 28, 2005

Wednesday, Sept. 28, 2005 | 10:55 a.m.

Forum to concentrate on rising natural gas costs

In response to rising natural gas costs -- which has translated into higher rates for customers of Nevada Power Co. and Southwest Gas Corp. -- state utility experts will hold a forum on the topic Thursday afternoon.

The meeting will include presentations on natural gas purchasing tactics used by utilities, rate calculation methodology, consumer assistance programs and conservation.

Consumer advocacy groups and the public have been encouraged to attend. The meeting will begin at 2 p.m. at the Public Utilities Commission offices at 101 Convention Center Drive, Suite 250, and it will be teleconferenced to PUC offices in Carson City and classrooms at Elko General Hospital.

Debt ratings upgraded

The debt ratings of Sierra Pacific Resources and its Las Vegas electric utility subsidiary, Nevada Power Co., have been upgraded by Moody's Investors Services.

Moody's published the upgrade on Tuesday, moving Sierra Pacific Resources' corporate family rating to Ba3 from B1. A series of additional ratings also were upgraded and the company's outlook remains at a "stable" level.

Even with the move, the company's credit rating remains below investment grade, but it is improved after being cut to junk status amid the fallout of the Western energy crisis of 2000-01.

In its report on the upgrade, Moody's cited "improved financial flexibility" after a series of refinancing moves and "improved regulatory relationships." Moody's also pointed to indications that the company's ongoing legal battle with Enron Corp. is unlikely to be resolved soon and "should not pose a funding risk over that time frame."

Durable goods orders rise by 3.3 percent in August

WASHINGTON -- New orders for big-ticket manufactured products rose in August at the fastest pace in three months, providing a reassuring sign that American factories are not headed for another slump.

The Commerce Department said that orders for durable goods, items expected to last at least three years, jumped 3.3 percent after falling by 5.3 percent in July. Analysts had been expecting a rebound but the rise was far better than the 0.8 percent advance they had forecast.

The big drop in July had raised concerns that the manufacturing sector, the hardest hit sector in the 2001 recession, could be in danger of falling into another slump.

Consumer confidence plunges

U.S. consumer confidence had its biggest drop in 15 years after Hurricane Katrina devastated the Gulf Coast and pushed gasoline prices to a record this month.

The consumer confidence index dropped to 86.6, the lowest in two years, from 105.5 in August, the New York-based Conference Board research group said Tuesday.

"We may now see a pullback in spending," said Quincy Krosby, who helps oversee $293 billion in assets as chief investment strategist for The Hartford in Hartford, Conn. "This winter and this Christmas shopping season are going to be the test case, and we're going to see if this is the tipping point for the consumer."

Federal Reserve Chairman Alan Greenspan said Monday a marked slowdown in the housing market, if one develops, may result in an "adjustment" in spending by consumers. Higher energy costs are also leaving Americans less to spend on other goods.

, hurting sales at companies such as Avon Products Inc.

Greenspan, in a Tuesday speech, said asset prices often fall after long periods of stability and "euphoria," echoing warnings he's issued over the past year that investors may be too complacent about risk.

"History cautions that extended periods of low concern about credit risk have invariably been followed by reversal with an attendant fall in the prices of risky assets," he said in a speech to the National Association for Business Economics.

Crude oil price little changed after falling amid shutdowns

Crude oil was little changed in New York after falling Tuesday on expectations that refinery shutdowns after Hurricanes Rita and Katrina will cut demand. Gasoline rose for a third day.

Seven refineries in Port Arthur and Beaumont, Texas, and Lake Charles, La., may take a month or more to resume operations because of flood damage and loss of power caused by Rita. Another 5 percent of U.S. refining capacity is off line because of Katrina. U.S. production of crude oil in the Gulf of Mexico remained halted Tuesday.

Crude oil for November delivery traded at $64.96 a barrel, down 11 cents, in after-hours electronic trading on the New York Mercantile Exchange at 10:01 a.m. Singapore time. Tuesday, the contract fell 75 cents, or 1.1 percent, to $65.07. Futures have fallen 8.2 percent since touching a record $70.85 a barrel on Aug. 30, the day after Katrina made landfall. Prices are 30 percent higher than a year ago.

Gasoline rose in electronic trading, extending yesterday's gains, on speculation the refinery shutdowns will lead to fuel shortages. Gasoline for October delivery rose as much as 1.85 cents, or 0.9 percent, to $2.1849 a gallon in after-hours trading, after yesterday gaining 3.72 cents, or 1.8 percent, to $2.1664, the highest close since Sept. 2. The contract was at $2.1725 at 9:40 a.m. Singapore time.

Motiva, Valero

Gasoline prices touched $2.92 a gallon on Aug. 31, the highest since trading began in 1984. Futures are 60 percent higher than a year ago.

Motiva Enterprises LLC said its refinery in Port Arthur, Texas, about 100 miles east of Houston, had flooding and wind damage. At Valero Energy Corp.'s refinery there, power poles and two cooling towers were toppled by winds. Citgo Petroleum Corp. said its plant in Lake Charles, Louisiana, was without power. Valero may reopen in two to four weeks. It was the only one of seven refiners in the area that gave an estimate.

Americans should "pitch in" and conserve fuel, President George W. Bush said on Sept. 26, repeating a request he made after Katrina.

"It looks like we took too much solace in the initial storm- damage reports," said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. "It's now clear that several refineries will be shut for a considerable length of time. Also, when the president talks about the need to curtail consumption you have to be concerned."

Pump Prices

Pump prices for regular-grade gasoline, averaged across the U.S., rose 1.3 cents to $2.813 a gallon, according to data released yesterday by the AAA, the nation's largest motoring organization. Prices have declined 8 percent since touching a record $3.057 on Sept. 2. Retail prices are 49 percent higher than a year ago.

Nine refineries in the Houston area escaped major damage and are in the process of starting up again. The region is home to about 12 percent of the nation's fuel-making capacity, compared with 10 percent around Port Arthur and Lake Charles.

Crude oil fell yesterday after the U.S. offered to release additional barrels from the nation's Strategic Petroleum Reserve. The U.S. and other members of the International Energy Agency offered about 60 million barrels of crude oil and fuel after Hurricane Katrina. Members of the Paris-based agency are considering further sales of oil from emergency reserves, Claude Mandil, executive director, said in Johannesburg yesterday.

Production Shut

All U.S. production of crude oil in the Gulf of Mexico, 1.53 million barrels a day, remained shut yesterday, according to the Minerals Management Service, which manages offshore resources. Natural gas output was 79 percent below normal, it said.

"Even after all of the storm damage, crude oil supplies are ahead of where they were a year ago," said Marshall Steeves, an analyst at Refco Inc. in New York. "Refiners haven't taken all the SPR barrels that have been offered and imports are arriving again."

Crude-oil supplies probably fell 1.75 million barrels in the week ended Sept. 23 from 308.1 million the week before, according to the median of forecasts by 12 analysts before an Energy Department report scheduled for release later today in Washington. Inventories in last week's report were 14 percent higher than a year ago.

U.S. gasoline and distillate fuel inventories probably fell last week as refiners along the Texas coast shut facilities and ports were closed, according to the analysts surveyed by Bloomberg. Distillate fuel is a category that includes heating oil and diesel.

Heating Oil

Heating oil for October delivery yesterday rose 1 cent to $2.0686 a gallon. Futures touched $2.21 on Sept. 1, the highest in 27 years of trading on the exchange. Heating oil is 50 percent higher than a year ago. The contract was at $2.064 in electronic trading.

Saudi Arabia's oil minister and the president of Exxon Mobil Corp. yesterday said world petroleum reserves are sufficient to meet demand for decades, seeking to ease concern that supplies are peaking and prices will stay near records. Saudi Arabia is the world's biggest oil exporter.

The country will "soon" add 200 billion barrels to its reserves of 264 billion barrels, the world's largest, Ali al- Naimi, the Saudi minister, said at an industry conference in Johannesburg. Exxon Mobil Corp. President Rex Tillerson said the world may have at least 3 trillion barrels of oil from conventional oil fields, oil sands deposits and other sources.

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