Gasoline Slides as June U.S. Payrolls, Factory Orders Decline
Gasoline slid for a fifth day as payrolls declined in June for the first time this year and May factory orders dropped, casting doubt on the strength of the economic recovery and fuel demand.
Prices slumped as the Labor Department reported June payrolls fell by 125,000, reflecting a reduction in federal census workers. Factory orders dropped 1.4 percent in May, the Commerce Department said. Futures tumbled yesterday as the U.S. manufacturing expansion slowed and output growth in China and Europe cooled.
“The uncertain economic statistics paint the economy as receding,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “But the jobs report is kind of mixed. Private sector jobs are up. The report is not negative enough that we will get a huge slide today.”
Gasoline for August delivery fell 1.99 cents, or 1 percent, to settle at $1.9777 a gallon on the New York Mercantile Exchange, the lowest settlement for the front-month contract since May 26.
Gasoline fell 8.8 percent this week as crude oil for August delivery slipped 8.5 percent, the biggest weekly decline for both since May 7. Heating oil for August delivery lost 9.3 percent, the biggest weekly drop since July 10, 2009.
“A lot of the economic news we’ve been getting suggests a flat line in the economy,” said Blake Robben, a Chicago-based senior market strategist at Lind-Waldock, a division of MF Global Inc. “I don’t see it turning into a double-dip recession, but we’re stuck in a sideways economy, which means these markets are going to be range bound.”
Orders Drop
The 1.4 percent decrease in factory bookings was the biggest since March 2009 and followed a revised 1 percent gain in April.
The drop in census workers left 339,000 temporary employees still working on the survey, indicating more cuts to come that will keep distorting the employment figures for months. Employment at companies rose 83,000. The jobless rate fell to 9.5 percent from 9.7 percent as the labor force shrank.
“The unemployment rate dropped, but that makes me nervous because it may mean people were taken off the rolls,” McGillian said. “But the expectation is for a nice jump in fuel demand around the holiday, and that it’s only because of the economic picture that the market is down.”
The July 4 holiday weekend is traditionally one of the peak periods for fuel demand.
Supplies of the motor fuel rose for the first time in eight weeks in the seven days ended June 25, the Energy Department reported June 30.
Gasoline Demand
U.S. gasoline demand surged 2 percent last week as drivers filled their tanks before the holiday weekend, MasterCard Inc. said in its June 29 SpendingPulse report. Fuel use was 2 percent below a year earlier, the fourth consecutive decline. The four- week average demand was down 2.2 percent from 2009 and has deteriorated against last year for five consecutive weeks.
“People are betting on future trends,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “When you go in the shoulder season of September, October, November, what will be the driving factor? The economy really has to do some turning around.”
Slower Growth
Economists at JPMorgan Chase & Co. yesterday lowered forecasts for second- and third-quarter growth, reflecting the influence of the European debt crisis on stocks, confidence and exports. The U.S. economy grew at a 3.2 percent annual rate from April through June and will expand at a 3 percent pace in the third quarter, down from a prior estimate of 4 percent, Michael Feroli, JPMorgan’s chief U.S. economist in New York, said in a note to clients.
The premium of gasoline over crude oil, or the crack spread, based on August contracts, narrowed about 3 cents to $10.92 a barrel. The margin has slipped 39 percent since reaching a 15-month high for the front-month contract of $17.88 on May 14.
Heating oil for August delivery sank 2.3 cents, or 1.2 percent, to settle at $1.9155 a gallon. The heating oil crack spread, based on August contracts, lost about 16 cents to $8.31 a barrel, the lowest level for the front-month contract since April 20.
Regular gasoline at the pump, averaged nationwide, declined 0.4 cent to $2.75 a gallon yesterday, AAA said on its website.
To contact the reporter on this story: Barbara J. Powell in Dallas at bpowell4@bloomberg.net.
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