Working gas in storage was 3,074 Bcf as of Friday, December 29, 2006, according to EIA estimates. This represents a net decline of 47 Bcf from the previous week. Stocks were 433 Bcf higher than last year at this time and 408 Bcf above the 5-year average of 2,666 Bcf. In the East Region, stocks were 201 Bcf above the 5-year average following net withdrawals of 33 Bcf. Stocks in the Producing Region were 170 Bcf above the 5-year average of 772 Bcf after a net withdrawal of 5 Bcf. Stocks in the West Region were 37 Bcf above the 5-year average after a net drawdown of 9 Bcf. At 3,074 Bcf, total working gas is above the 5-year historical range.

Summary of Weekly Petroleum Data for the Week Ending December 29, 2006

U.S. crude oil refinery inputs averaged over 15.5 million barrels per day during
the week ending December 29, down 96,000 barrels per day from the previous
week's average.  Refineries operated at 91.0 percent of their operable capacity
last week.  Gasoline production declined slightly last week compared to the
previous week, averaging over 9.3 million barrels per day, while distillate fuel
production increased slightly, averaging 4.3 million barrels per day.

U.S. crude oil imports averaged over 10.1 million barrels per day last week, up
997,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged over 9.4 million barrels per day, or 550,000 barrels
less than averaged over the same four-week period last year.  Total motor
gasoline imports (including both finished gasoline and gasoline blending
components) last week averaged nearly 1.3 million barrels per day. Distillate
fuel imports averaged 385,000 barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) declined by 1.3 million barrels compared to the previous
week.  However, at 319.7 million barrels, U.S. crude oil inventories remain
above the upper end of the average range for this time of year.  Total motor
gasoline inventories rose by 5.6 million barrels last week, and are in the
middle of the average range.  Distillate fuel inventories increased by 2.0
million barrels, and are in the upper half of the average range for this time of
year.  Increases were seen in both high-sulfur distillate fuel (heating oil)
inventories and diesel fuel inventories (a combination of ultra-low-sulfur and
low-sulfur).  Total commercial petroleum inventories rose by 1.8 million barrels
last week, and are above the upper end of the average range for this time of
year.

Total products supplied over the last four-week period has averaged nearly 20.9
million barrels per day, or 3.0 percent less than averaged over the same period
last year.  Over the last four weeks, motor gasoline demand has averaged over
9.3 million barrels per day, or 0.5 percent above the same period last year. 
Distillate fuel demand has averaged nearly 4.3 million barrels per day over the
last four weeks, or 1.3 percent below the same period last year. Jet fuel demand
is down 8.1 percent over the last four weeks compared to the same four-week
period last year.

Total SA and Sociedade Nacional de Combustiveis de Angola said Wednesday they made an oil discovery in the ultra-deep waters of the Angolan offshore that tested at a rate of 3,686 barrels per day.

The Salsa-1 exploration well was drilled in a water depth of 1,806 meters (5,925 feet), Total said in a statement. Technical studies are under way to evaluate the results from the tests, and further exploration drilling is under way and planned across the area.

Sonangol, the state oil company, holds the concession rights for the area where the test well was drilled. The contractor group is formed by Total, which holds a 30 percent interest; Sonangal with 20 percent and Marathon Oil Co. with 30 percent.

Crude oil fell to a four-week low as milder-than-average U.S. temperatures trumped concern about diminishing inventories in the world's biggest energy consumer.

Temperatures will be higher than normal in most of the country from Jan. 2 through Jan. 6, according to the U.S. National Weather Service. U.S. crude supplies have declined 20.2 million barrels since Nov. 17, the biggest five-week drop since September 2005, when hurricanes damaged oil facilities in the Gulf of Mexico, according to yesterday's Energy Department report.

``Most market participants are far more concerned by the milder weather in the U.S., which is expected to continue throughout the rest of the winter,'' said Michael Davies, an analyst in London with commodities broker Sucden (U.K.) Ltd.

Crude oil for February delivery fell as much as 54 cents, or 0.9 percent, to $59.99 a barrel on the New York Mercantile Exchange, the lowest since Nov. 27. The contract traded at $60.03 at 1:57 p.m. London time. Brent crude oil dropped 58 cents to $60.09 a barrel on the London-based ICE Futures exchange.

The price of the near-month contract has averaged $66.23 a barrel this year, 17 percent higher than in 2005. Supply disruptions in Nigeria and Iraq, and concern Iran would curb shipments because of the confrontation over the country's nuclear program, caused New York-traded crude to reach a record of $78.40 a barrel on July 14.

The three countries were responsible for 9.6 percent of global output last year, according to the International Energy Agency.

Crude oil was little changed after falling to a one-month low as mild weather in most of the U.S. reduced heating-fuel consumption.

Higher-than-normal temperatures will cover most of the lower 48 states from Jan. 1 through Jan. 5, the U.S. National Weather Service said. Natural gas, a competing fuel, plunged 13 percent in three sessions on the warm weather. Some users switch between natural gas and fuels refined from crude oil based on cost.

``As long as the weather is mild the market is going to test the lower end of the recent trading range,'' said Eric Wittenauer, an energy analyst at A.G. Edwards & Sons Inc. in St. Louis.

Crude oil for February delivery fell 10 cents to $61 a barrel at 11:47 a.m. on the New York Mercantile Exchange. The contract touched $60.28, the lowest since Nov. 28. Prices tumbled 2.1 percent yesterday, the biggest one-day decline since Nov. 16. Futures traded between $59.26 and $64.15 over the past month.

``We've had an amazingly mild start to the winter,'' said Dale Mohler, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``We are going to see warmer-than-normal weather for a minimum of two more weeks.''

Home-heating demand in the Northeast, the region responsible for 80 percent of U.S. heating-oil use, will be 28 percent below normal through Jan. 3, said Weather Derivatives, a forecaster in Belton, Missouri.

Natural gas for January delivery fell 16.7 cents, or 2.7 percent, to $5.946 per million British thermal units in New York. Futures touched $5.855, the lowest since Oct. 16.

Oil edged higher towards $63 a barrel on Tuesday after Iran warned it could use its oil exports as a weapon following the U.N. Security Council's decision to impose sanctions on its trade in nuclear goods.

U.S. crude gained 19 cents to $62.60 a barrel by 1454 GMT. Brent crude rose 37 cents to $62.79.

Public holidays across Europe meant trading volumes were very thin.

After months of deadlock, the Security Council agreed on Saturday to impose sanctions on Iran's trade in nuclear materials and technology, drawing a warning from Tehran.

"If necessary, Iran will use any weapon to defend itself," Oil Minister Kazem Vaziri-Hamaneh was quoted as saying by the semi-official Fars news agency on Tuesday. In the past he has said Iran would rather not play the oil card.

Iran, the world's fourth-largest crude producer, has condemned the U.N. resolution as illegal and on Sunday vowed to speed up enrichment work, which could heighten tensions.

Oil prices rose earlier in the year in response to fears Iran might cut its oil exports or disrupt Gulf shipping as its row with the West over its nuclear programme escalated. The issue had faded since summer as the U.N. appeared unable to agree on how to deal with Tehran.

Some analysts said traders might disregard the latest developments unless they saw evidence of supply disruption.

"It is certainly a bullish factor, but I think geopolitical matters will be ignored unless clearer risks materialise," said Makoto Takeda, energy analyst at Bansei Securities Co.

OPEC CUTS

Prices also drew support after Abu Dhabi's state oil firm, the main producer in the United Arab Emirates, said it would cut exports of nearly half its crude grades by 3-5 percent in February.

The statement was the first sign the Organization of the Petroleum Exporting Countries intended to comply with a second round of output reductions agreed this month.

The new 500,000 barrels per day cuts are scheduled to take effect in February, giving the producer group time to assess whether peak winter demand will be enough to reduce swollen consumer inventories.

Unusually warm weather in the United States has curbed fuel demand and helped to drag prices just over $1 lower last week.

DTN Meteorlogix said on Monday temperatures in the U.S. Northeast had averaged 10-16 degrees Fahrenheit (5-8 Centigrade) above normal over the long Christmas holiday weekend. But conditions were set to grow colder, nearing normal by Saturday.

Given growing geopolitical risks and the start of a new year, some analysts predicted a new flow of investment-class money could further fuel any rally.

"We expect another influx of financial money into oil in the coming weeks, and geopolitical threats, such as Iran and Nigeria, remain active," said Mike Wittner, head of energy market research at Calyon Corporate and Investment Bank.

Gazprom, the Russian energy monopoly, bought control of the world’s largest combined oil and natural gas development Thursday after a highly publicized campaign of pressure on its foreign operator, Royal Dutch Shell.

Shell’s sale of 50 percent plus one share followed months of accusations against the project by a Russian environmental regulator — a problem that President Vladimir V. Putin, in announcing Gazprom’s entry, said would now most likely be resolved.

Critics of the sale called it the first effective nationalization of a large foreign oil or gas project in Russia, which this year surpassed Saudi Arabia in oil production.

Mr. Putin announced the deal at a Kremlin meeting Thursday evening with executives from Gazprom, Shell and the Japanese trading houses Mitsui and Mitsubishi, which also own part of the project. He made a point of saying Russia remained open to energy investment.

“When speaking about the energy sector, we should admit this is a very liberalized sector of the economy,” Mr. Putin said. “All of the largest world companies are represented in Russia.”

Under the deal, Gazprom will pay $7.45 billion for the controlling share of Sakhalin 2, the vast energy project in Russia’s remote Far East, north of Japan. The project includes offshore platforms, 500 miles of oil and natural gas pipelines, a liquefied natural gas plant and an oil terminal.

The partners have so far sunk about $12 billion into Sakhalin 2, meaning they will recoup about half of their capital investment so far but will be compensated little for the estimated four billion barrels of recoverable reserves at the site.

The price Gazprom paid was “below market rate,” Alex Kormshchikov, an oil and gas analyst at UralSib, said by phone Thursday.

Analysts said the price valued Sakhalin 2 reserves at less than $4 a barrel of oil equivalent, a benchmark in valuing oil and gas deals, compared with an average of $4.90 a barrel at large Russian oil companies like Lukoil or Rosneft.

Still, Shell’s chief executive, Jeroen van der Veer, said he welcomed the stability that an agreement implied, after a turbulent few months when a Russian regulator threatened to halt work on the pipeline, claiming illegal logging and damage to salmon streams.

“I think the great news is that now there is stability so we can all work together, all the shareholders, to get the project up and running as soon as possible,” Mr. van der Veer said at the Kremlin meeting.

Shell reduced its share of Sakhalin 2 to 27.5 percent, from 55 percent; Mitsui to 12.5 percent, from 25 percent; and Mitsubishi to 10 percent, from 20 percent, according to a statement released by Gazprom. Gazprom and Shell also agreed to cooperate on unspecified future projects in Russia.

Russian authorities also backpedaled on their objection to a cost overrun announced by Shell in July 2005, agreeing to approve a doubling in the project cost now that Gazprom is a partner. The agreement was taken as another sign of the increased intertwining of government and business in Russia. About one-third of Russian’s oil and most of its natural gas production is under the control of state companies.

“Regulatory organs in Russia are essentially an arm of Gazprom,” Alex Turkeltaub, managing director of the Frontier Strategy Group, a risk consultancy in Los Angeles, said Thursday in a telephone interview. Mr. Turkeltaub, who has advised companies on political risk in Russia, said other Western oil companies operating multibillion-dollar operations here, like BP and Exxon Mobil, should now expect regulators to extract similar concessions.

At Sakhalin, Gazprom will honor existing contracts for delivery of liquefied natural gas after the project goes into production in 2008, but will control pricing and policies on all future sales, according to the statement.

On Thursday, Gazprom announced second-quarter profit of $5.2 billion, up 123 percent from last year.

The Sakhalin 2 sale came just two years after Russian tax authorities confiscated the largest production unit from Yukos and sold 76.6 percent at a rigged auction to a newly created shell company, Baikal Finance, for $9.4 billion. Yukos executives said the price was far less than true value. That pumping asset, now part of Rosneft, is valued by investors today at more than $60 billion.

Working gas in storage was 3,167 Bcf as of Friday, December 15, 2006, according to EIA estimates. This represents a net decline of 71 Bcf from the previous week. Stocks were 342 Bcf higher than last year at this time and 274 Bcf above the 5-year average of 2,893 Bcf. In the East Region, stocks were 110 Bcf above the 5-year average following net withdrawals of 52 Bcf. Stocks in the Producing Region were 117 Bcf above the 5-year average of 824 Bcf after a net withdrawal of 14 Bcf. Stocks in the West Region were 47 Bcf above the 5-year average after a net drawdown of 5 Bcf. At 3,167 Bcf, total working gas is within the 5-year historical range.

Summary of Weekly Petroleum Data for the Week Ending December 15, 2006

U.S. crude oil refinery inputs averaged over 15.5 million barrels per day during
the week ending December 15, up 232,000 barrels per day from the previous week's
average. Refineries operated at 90.7 percent of their operable capacity last
week. Gasoline production increased last week compared to the previous week,
averaging over 9.3 million barrels per day, while distillate fuel production
also increased, averaging over 4.2 million barrels per day.

U.S. crude oil imports averaged 8.9 million barrels per day last week, down
696,000 barrels per day from the previous week. Over the last four weeks, crude
oil imports have averaged over 9.6 million barrels per day, 470,000 barrels less
than averaged over the same four-week period last year. Total motor gasoline
imports (including both finished gasoline and gasoline blending components) last
week averaged 843,000 barrels per day. Distillate fuel imports averaged 541,000
barrels per day last week.

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) dropped by 6.3 million barrels compared to the previous week.
However, at 329.1 million barrels, U.S. crude oil inventories remain well above
the upper end of the average range for this time of year. Total motor gasoline
inventories increased by 1.0 million barrels last week, but remain below the
lower end of the average range. Distillate fuel inventories rose by 1.2 million
barrels, and are in the middle of the average range for this time of year.
Increases were seen in both high-sulfur distillate fuel (heating oil)
inventories and diesel fuel inventories (a combination of ultra-low-sulfur and
low-sulfur). Total commercial petroleum inventories fell by 7.9 million barrels
last week, and are just above the upper end of the average range for this time
of year.

Total products supplied over the last four-week period has averaged over 21.1
million barrels per day, or 0.4 percent more than averaged over the same period
last year. Over the last four weeks, motor gasoline demand has averaged over
9.4 million barrels per day, or 2.3 percent above the same period last year.
Distillate fuel demand has averaged nearly 4.3 million barrels per day over the
last four weeks, or 2.0 percent above the same period last year. Jet fuel demand
is down 7.2 percent over the last four weeks compared to the same four-week
period last year.

Oil prices held above $63 on Wednesday ahead of data expected to show a fall in U.S. crude stocks, adding to perception that high inventory levels that hit prices in the third quarter have been reversed.

U.S. crude for February delivery traded at $63.87 a barrel at 1239 GMT, up 72 cents from the January contract expiry of $63.15 on Tuesday. London Brent February crude rose 52 cents to $63.33.

Delays to U.S. oil imports due to dense fog along the Gulf of Mexico coast forced refiners to draw on inventories last week.

U.S. crude stocks were expected to fall 1.7 million barrels in government data due later on Wednesday, according to a Reuters poll of analysts.

The fog disruptions exacerbated an overall tightening inventory picture, analysts said.

U.S. commercial crude and refined product stocks combined were just half a million barrels higher than the same time a year ago last week, a sharp fall from a huge 76 million barrels year-on-year surplus at the end of September.

Crude stocks were still four percent higher than a year ago, but gasoline and distillate stocks were lower.

"I think what we are getting here is a little bit of a delayed reaction to tightening inventories," said Paul Horsnell at Barclays Capital.

"The tightening over the past two months hasn't really been priced fully in yet. Products markets looked horribly slack two months ago, but inventories have been falling by a million barrels per day in the United States."

Other industrialized countries have also seen stocks fall. OECD stocks fell by 40 million dollars in October alone, the International Energy Agency said last week.

"Inventories are still comfortable," said Mike Wittner at investment bank Calyon. "But there is no question at all that we have had a quite serious drawdown in stocks. We're back to square one in terms of where we were a year ago."

Chevron Corp. on Monday said it has completed an expansion of its Pascagoula, Miss., refinery that will boost capacity by roughly 10 percent, or 5.5 million gallons.

The Pascagoula refinery is Chevron's largest wholly owned oil refinery. It processes about 330,000 barrels of crude per day into gasoline and other fuels.

Chevron had shut the plant for about two and half months to complete the expansion of its fluid catalytic cracking unit, which breaks down crude oil.

Chevron shares fell $2.05, or 2.7 percent, to end at $73.33 on the New York Stock Exchange. They have traded between $53.76 and $76.20 over the past year.

Chevron Corp. on Monday said it has completed an expansion of its Pascagoula, Miss., refinery that will boost capacity by roughly 10 percent, or 5.5 million gallons.

The Pascagoula refinery is Chevron's largest wholly owned oil refinery. It processes about 330,000 barrels of crude per day into gasoline and other fuels.

Chevron had shut the plant for about two and half months to complete the expansion of its fluid catalytic cracking unit, which breaks down crude oil.

Chevron shares fell $2.05, or 2.7 percent, to end at $73.33 on the New York Stock Exchange. They have traded between $53.76 and $76.20 over the past year.