Gasoline Slides to Five-Week Low as U.S. Demand Declines

Gasoline slid to a five-week low as demand for the motor fuel dropped before the Nov. 24 U.S. Thanksgiving holiday and refineries completed repairs and increased production.

Futures sank as consumption in the week ended Nov. 4, averaged over four weeks, was 5.6 percent below a year earlier, Energy Department data showed. Gasoline’s discount to heating oil was the widest in three years. Gasoline traded below London benchmark Brent crude, and its premium over West Texas Intermediate crude slipped to the lowest level in 11 months.

“We’re seeing the return of a couple of refining units on the Gulf Coast and supplies may be increasing as we head into the holidays,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “In light of reduced demand, supplies appear to be adequate.”

Gasoline for December delivery fell 6.85 cents, or 2.6 percent, to settle at $2.5353 a gallon on the New York Mercantile Exchange, the lowest settlement since Oct. 4. Prices declined for the fifth straight day, dropping 7.1 percent in the longest losing streak since Aug. 4.

“It got carried up by the rising level of oil prices but the fundamentals didn’t justify it,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Valero Energy Corp. (VLO) said Nov. 11 that it was starting a crude unit and coker at its 315,000-barrel-a-day Corpus Christi, Texas, refinery complex after repairs. Refineries traditionally schedule maintenance in the fall after the summer driving season and before the winter heating oil season.

Discount to Brent

Gasoline traded $5.41 a barrel below Brent, the fifth day it traded at a discount. Refiners on the U.S. East Coast, where Nymex futures are delivered, process oil priced relative to the European benchmark.

“The crack versus Brent is negative so all refiners on a Brent-based crude refining system, their gasoline margins aren’t looking so good,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

The premium of December-delivery gasoline over WTI, or the crack spread, fell $2.03 to $8.34 a barrel, the smallest gap since December.

Preliminary volume in electronic trading for gasoline was 187,725 contracts as of 3:25 p.m. in New York, 46 percent above the three-month average. Heating oil volume was 86,038 contracts, 36 percent less than the average.

Heating Oil-Gasoline

Heating oil outperformed gasoline as the U.S. supply of distillate fuel last week was the lowest since 2008. The spread between the two commodities for December delivery increased to 62.69 cents from 56.78 cents on Nov. 11. It’s the largest gap since November 2008.

“Distillate inventories are not so robust, well below last year and we’re only a couple of months away from winter,” Chirichella said.

December-delivery heating oil fell 0.94 cent, or 0.3 percent, to settle at $3.1622 a gallon on the exchange, the first loss in three days.

Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.417 a gallon yesterday, according to AAA data.

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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