Gasoline Tumbles as SEC Suit Against Goldman Raises Concern Over Recovery

Gasoline plunged more than 3 percent, widening its losses, as Goldman Sachs Group Inc. was sued by U.S. regulators for fraud, sending stocks lower and raising concern that the economic recovery will slow.

Gasoline fell the most in 10 weeks as U.S. stocks widened losses after the Securities and Exchange Commission accused Goldman Sachs of defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages. Gasoline dropped earlier as the Reuters/University of Michigan preliminary April consumer sentiment index fell to 69.5 from a reading of 73.6 in March.

“Just when the market is getting confident, the rug can be pulled out so easily,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “What are the implications of the Goldman news? Investors don’t like uncertainty going into the weekend.”

Gasoline for May delivery fell 5.96 cents, or 2.6 percent, to $2.2666 a gallon at 1:13 p.m. on the New York Mercantile Exchange. Prices touched $2.2461, a 3.4 percent drop.

Gasoline, crude oil, the Standard & Poor’s 500 Index and the MSCI World Index lost the most since Feb. 4, with the S&P falling 2 percent at 12:38 p.m. in New York and the MSCI down by 1.9 percent. Crude oil for May delivery lost 3.2 percent to $82.78 on the exchange.

“We’re not seeing a strong enough recovery in the U.S. for people to be comfortable with prices at these levels,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, a division of MF Global Inc.

Consumer Confidence

The consumer confidence gauge was projected to rise to 75, according to the median forecast in a Bloomberg News survey of 69 economists. The gauge of current conditions, reflecting Americans’ perceptions of their financial situation and whether it is a good time to buy big-ticket items like cars, dropped to 80.7, the lowest level this year, from 82.4.

Futures fell yesterday as the Labor Department reported that initial jobless claims rose by 24,000 to 484,000 in the week ended April 10, the most since Feb. 20.

“We have too many people without jobs, and we have rallied way too high for the demand that we have,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota.

Stockpiles of the motor fuel were 4.7 percent above the five-year average for the period in the week ended April 9, according to the Energy Department.

Gasoline also slipped a second day as the dollar gained 0.6 percent versus the euro at 11:35 a.m. in New York, weakening the investment appeal of commodities.

‘Plenty of Everything’

“The dollar has got a little firmness in it and we appear to have plenty of everything,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas. “And the contangos are widening on heating oil, gasoline and crude so it’s difficult to trade higher on an absolute price basis.”

The spread between the May contract and the June contract widened to 1.6 cents from 1.31 cents. The premium of gasoline over heating oil narrowed to 6.49 cents from 7.39 cents.

The crack spread, or the difference between gasoline and crude oil, based on May contracts, narrowed about 25 cents to $11.94 a barrel.

Regular gasoline at the pump, averaged nationwide, rose 0.4 cent to $2.862 a gallon, AAA, the nation’s biggest motoring organization, said today on its Web site.

Heating oil for May delivery lost 5.06 cents, or 2.3 percent, to $2.2017 a gallon at 1:15 p.m. on the exchange. The heating oil crack spread, based on May contracts, widened about 29 cents to $9.38 a barrel.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net.

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