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Gasoline Futures Increase to 1-Week High on Lower Refinery Rates, Supplies
Gasoline jumped to the highest level in a week as refiners reduced rates for the first time in eight weeks and inventories fell unexpectedly. The profit for refining oil into gasoline rose to a 15-month high.
Futures rose as motor fuel stockpiles dropped 2.81 million barrels to 222.1 million last week, a four-week low. Analysts surveyed by Bloomberg News estimated a gain of 400,000 barrels. Refinery rates fell 1.2 percentage points to 88.4 percent.
“This is moderately bullish,” said Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. “You’re seeing a little more balance, refiners are pulling back, demand looks more realistic and you’re seeing a stock draw for gasoline as you should this time of the year.”
Gasoline for June delivery gained 1.52 cents, or 0.7 percent, to settle at $2.2104 a gallon on the New York Mercantile Exchange. Prices touched $2.2345 after the inventory report was released at 10:30 a.m. in Washington.
Gasoline pared gains as crude oil declined after supplies rose to an 11-month high. Crude for June delivery touched $74.75 a barrel before settling down 0.9 percent at $75.65.
“It’s not like we have any shortage of products out there so the undue strength is being magnified by the weakness in crude and I don’t consider it sustainable,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas.
Crack Spread Grows
The gasoline crack spread, or the fuel’s premium over crude, based on June contracts, widened about $1.36 to $17.19 a barrel. That’s the highest settlement since February 2009.
“If crude gets killed, products may go negative but they’ll outperform on the crack spreads,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston. “The crack is sustainable if we have demand pull through, and in order to have strong demand, you have to have the economy continue to rebound and the retail price can’t get too high.”
Crude supplies rose 1.95 million barrels to 362.5 million, the highest level since May 29, 2009. Stockpiles at Cushing, Oklahoma, where the New York-traded West Texas Intermediate grade is stored, rose 2.2 percent to 37 million barrels, the most since the department began reporting on supplies at the hub in April 2004.
“We’re still putting oil in Cushing and at this time of year we ought to be drawing,” Pursell said. “There’s also still significantly more gasoline inventories and distillate inventories than a year ago.”
West Coast Inventories
Much of last week’s decline in gasoline inventories was on the West Coast, where supplies fell 2.1 million barrels, or 6.3 percent. Stocks were 5.1 percent above a year earlier and 6.3 percent above the five-year average for the period.
“May 1 is when California switches to summer-grade gasoline” and that caused the decline, Cohan said.
Demand for gasoline, as measured by what refiners and blenders supply to wholesalers, fell 1.5 percent to an average 9.14 million barrels a day, a five-week low. The four-week average demand was 2.7 percent higher than a year earlier.
The Energy Department predicted gasoline demand will average 9.2 million barrels a day this summer, up 0.9 percent from last year.
Output of gasoline by refiners and blenders fell to an eight-week low, dropping 2 percent to 8.96 million barrels a day. Imports of the motor fuel fell 26 percent to 856,000 barrels a day, the first decline in four weeks.
Distillates Rise
Supplies of distillates, including heating oil and diesel, rose 1.4 million barrels to 153.8 million, the sixth consecutive increase and the highest level in 13 weeks. Stocks are 28 percent above the five-year average for the period. Supplies of ultra-low sulfur diesel increased 0.3 percent to the highest since Feb. 26.
Demand for distillates was almost unchanged at 3.89 million barrels a day. Averaged over four weeks, consumption was 7.5 percent above a year earlier.
Heating oil for June delivery gained 1.9 cents, or 0.9 percent, to settle at $2.1591 a gallon on the exchange. The crack spread, based on June contracts, widened about $1.52 to $15.03 a barrel, the highest since February 2009.
Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $2.896 a gallon, AAA, the nation’s biggest motoring organization, said today on its website.
To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net.
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