Gasoline Falls as Home Prices Drop, Supplies Projected to Rise

Gasoline futures slipped to a five- week low on speculation that supplies rose last week and as a report that U.S. home prices declined indicated the economy and fuel demand may struggle to improve in 2011.

Futures fell as much as 2.8 percent as the S&P/Case-Shiller index of home values in 20 cities sank 1.6 percent in November from the prior year, the biggest annual loss since December 2009. Gasoline stockpiles probably rose 2.3 million barrels last week, according to the median estimate of 16 analysts in a survey by Bloomberg News.

“There no doubt the market has been well supplied and that it takes the housing numbers as a negative, especially if we see concern about the global economy start to rise,” said Phil Flynn, vice president of research at PFGBest in Chicago.

Gasoline for February delivery fell 4.88 cents, or 2 percent, to $2.3644 a gallon at 12:13 p.m. on the Nymex. Prices touched $2.3466, the lowest intraday price for the contract nearest to expiration since Dec. 20.

The discount of gasoline to heating oil widened 2.36 cents to 22.97 cents, the largest gap since January 2009.

“Heating oil is supported by weather and gasoline is not because people travel less in cold weather,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota. “We have adequate stocks and we’re not even into gasoline season yet.”

Cold Weather

Below-normal temperatures were projected in the U.S. Northeast Jan. 30 through Feb. 7, according to the National Weather Service’s Climate Prediction Center. The Northeast is the largest user of heating oil.

The gasoline crack spread, based on March contracts, narrowed 65 cents to $13.87 a barrel.

Supplies of distillates, including heating oil and diesel, probably dropped 500,000 barrels in the week ended Jan. 21, according to the survey. Stockpiles of crude oil increased 1.2 million barrels.

In the week ended Jan. 14, inventories of heating oil sank 809,000 barrels, while supplies of ultra-low sulfur diesel, used by trucks, rose 1.81 million barrels to the highest level in 17 weeks, according to department data.

“It’s been a pretty cold winter but I think the cold has been built into the price and the weather is disruptive enough that it’s been bad for transport fuels,” said Sander Cohan, an analyst with Energy Security Analysis Inc in Wakefield, Massachusetts.

Heating oil for February delivery dropped 2.6 cents, or 1 percent, to $2.5933 a gallon. The heating oil crack spread, based on March contracts, widened 8 cents to $22.38 a barrel.

Regular gasoline at the pump, averaged nationwide, fell 0.2 cent to $3.11 a gallon yesterday, AAA said on its website.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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