Gasoline slid, following crude oil lower, after Japan’s strongest earthquake in at least a century forced several oil refineries to close and lowered fuel demand.
Futures dropped the most in five weeks as Japanese companies including JX Nippon Oil & Energy Corp. and Cosmo Oil Co. have shut more than 820,000 barrels a day of capacity, or about 19 percent of the country’s total processing ability. Japan is the third-largest crude consumer.
“If there’s a lot of damage to refineries, for the time being, supplies of oil that would normally be consumed by Japan will be on the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Gasoline for April delivery lost 4.46 cents, or 1.5 percent, to $2.975 a gallon at 9:33 a.m. on the New York Mercantile Exchange, after touching $2.9425. Prices were heading toward a weekly drop of 2.3 percent, the first loss in five weeks.
The magnitude 8.9 earthquake struck off the coast of Sendai, a city of 1 million in the northeast, unleashing a tsunami as high as 10 meters (33 feet) that engulfed towns along the coast.
Japan consumed 4.42 million barrels a day of crude in 2010, according to data from the International Energy Agency’s Feb. 10 monthly Oil Market Report. China used 9.39 million and the U.S. 19.25 million, the agency said.
“This will lead to demand destruction and the initial reaction of the market is going to be down,” said Phil Flynn, vice president of research at PFGBest in Chicago.
Brent crude for April settlement declined $1.93 to $113.50 a barrel on London’s ICE Futures Europe exchange. Products futures are vulnerable to changes in Brent because refineries supplying fuel to New York Harbor, the delivery point for heating oil and gasoline futures, process crude grades priced relative to the European benchmark.
Nymex April crude sank $2.39 to $100.31 a barrel.
Heating oil for April delivery dropped 1.98 cents, or 0.7 percent, to $3.0251 a gallon and headed for a weekly drop of 2.1 percent.
Regular gasoline at the pump, averaged nationwide, advanced 1.3 cents to $3.542 a gallon yesterday, AAA said on its website, the highest level since Oct. 4, 2008.
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