Gasoline Futures Slide as U.S. Economic Data Indicates Weakness

Gasoline fell, erasing an earlier gain, as data on home sales, leading indicators and U.S. manufacturing indicated economic weakness.

Futures dropped, after climbing as much as 1.7 percent, as the index of U.S. leading indicators slipped in April after nine months of increases. Manufacturing in the Philadelphia area grew in May at the slowest pace in seven months. April existing home sales declined. Pump prices decreased a sixth straight day.

“Fuel consumption, the economy, people are just worried about a lot of things, and the market isn’t ready to press forward,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota.

Gasoline for June delivery dropped 2.95 cents, or 1 percent, to settle at $2.926 a gallon on the New York Mercantile Exchange. Prices are down 16 percent since reaching $3.4648 on April 29, the highest level since July 15, 2008.

June was 2.2 cents over July futures, down from yesterday’s 2.95-cent difference. The spread has narrowed 83 percent since reaching a 12.59-cent premium on May 10, which was the largest backwardation since August 2009.

Purchases of existing homes fell 0.8 percent to a 5.05 million annual pace last month, the National Association of Realtors said today.

The Conference Board’s gauge of the outlook for the next three to six months decreased 0.3 percent after a revised 0.7 percent gain in March, the New York-based group said today.

Economic Index

The Federal Reserve Bank of Philadelphia’s general economic index fell to 3.9, the weakest reading since October, from 18.5 a month earlier. The region covers eastern Pennsylvania, southern New Jersey and Delaware.

Futures rose as high as $3.0048 a gallon earlier as unemployment claims declined by 29,000 to 409,000 in the week ended May 14, Labor Department figures showed.

Regular retail gasoline dropped 2.1 cents yesterday to $3.905 a gallon, AAA said on its website. Prices have fallen 2 percent since May 4 when they reached $3.985, the highest level since July 24, 2008.

“The bullish factor is definitely the jobless claims, which gave the outlook for demand a little bit of a boost,” said Phil Flynn, vice president of research at PFGBest in Chicago. “The falling gasoline prices will give a boost to Memorial Day travel.”

The peak gasoline demand period starts with the Memorial Day holiday on May 30 and ends on Labor Day on Sept. 5.

Trips by auto for the holiday weekend will slip for the first time in three years, dropping 100,000 to 30.9 million, according to a forecast by the American Automobile Association, the biggest U.S. motoring organization.

The Energy Department reported yesterday that gasoline consumption last week, measured on a four-week average, fell 2.3 percent from a year earlier to 8.99 million barrels a day as the U.S. approaches the summer driving season.

Heating oil for June delivery dropped 1.12 cents, or 0.4 percent, to settle at $2.8947 a gallon on the exchange.

To contact the reporter on this story: Barbara J 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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