UPI Energy Watch

Oil prices rally, hold above $53 per barrel

Following an announcement from the U.S. government Monday that it would buy debt and mortgage bonds, oil and other commodity prices increased to the highest prices they have reached in the last four months.

Prices fell slightly Tuesday on speculation that U.S. oil reserves may have increased last week, but prices held above $53 per barrel, Petroleum Economist reports.

Monday prices reached about $54 per barrel.

The weakening dollar also helped bring investors back to the commodities market, said Stephen Schork, editor of the Schork Report, an oil-prices newsletter. "Over the last three weeks the dollar has dropped by around 6.5 percent while Nymex crude has jumped by more than one-fifth."

The jump in prices is likely temporary as the International Energy Agency continues to report that oil demand this year will be at least 1 million barrels per day lower than it was in 2008.

Also still down is new investment in oil and gas development projects. Several members of the Organization of Petroleum Exporting Countries have canceled projects because of the high cost of projects and the low cost of oil.

OPEC has cut its output as a way to try to raise oil prices, but some members, including Iran and Venezuela, want to push prices to the $70- to $80-per-barrel range.

Some analysts and firms like Wood Mackenzie believe demand and oil prices will not recover until at least 2010.

Two large Canadian oil companies enter mergers

Canada's Suncor Energy will buy rival company Petro-Canada, and NAL Oil and Gas Trust will acquire Alberta Clipper Energy Inc.

The Suncor merger deal is valued at $15.6 billion. It still must be approved by shareholders from both companies, the Institute of Commercial Management's Commercial and Business News reports.

If the merger is finalized, Suncor Energy and Petro-Canada together will be Canada's largest oil firm and will retain the name of Suncor, which is based in Calgary, Alberta.

"This merger creates a made-in-Canada energy leader with the assets, cost structure and financial strength to compete globally," said Rick George, president and chief executive of Suncor.

NAL Oil and Gas Trust will buy Alberta Clipper Energy Inc. for $93.8 million, RTTNews reports.

The deal is expected to close by June 1.

"The assets of Alberta Clipper provide a strong strategic fit with NAL's asset base," said Andrew Wiswell, NAL's president and chief executive officer. "The addition of prospective acreage and production in existing core areas is consistent with NAL's strategic direction to add assets."

Oil slowdown impacts helicopter business

Oil companies are cutting back on new projects, either delaying or canceling them altogether. Now other related industries are feeling the pinch as well.

Bristow Helicopters, one of the largest helicopter operators involved in Britain's offshore oil and gas industry, may be planning job cuts because of the decline in the North Sea oil and gas business, The Scotsman reports.

Management salaries have already been frozen and capital spending is being reviewed.

"Bristow Helicopters is seeing a decline in the demand for its oil and gas helicopter services primarily in the exploration and development sector, with more limited declines in the production sector," a company spokeswoman told the newspaper.

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Closing oil prices, March 24, 3 p.m., London

Brent Crude oil: $53.09

West Texas Intermediate crude oil: $53.12

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(e-mail: energy@upi.com)