Gasoline Falls as Demand Declines, Home Market Shows Weakness

Gasoline retreated after the Energy Department reported weaker fuel demand for last week.

Futures slipped as demand fell 0.4 percent to 8.38 million barrels a day even as gasoline stockpiles contracted a fifth straight week. Fuel use over the past four weeks was 7.8 percent below a year earlier.

“I like the gasoline draw, but retail prices continue to inch up,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston. “It’s not good. With demand numbers weak and prices higher, you wonder what’s going to make those demand numbers go higher.”

Gasoline for April delivery fell 0.6 cent to settle at $3.3571 a gallon on the New York Mercantile Exchange. Futures have surged 25 percent this year, the best performance in the Standard & Poor’s GSCI index of 24 commodities.

Gasoline stockpiles dropped 1.21 million barrels to a 10- week low of 226.9 million as output slipped 0.7 percent. Gasoline supplies are 3.3 percent higher than year-earlier levels. A decline of 2 million barrels was projected in a survey by Bloomberg News.

“This is neutral to bullish, and will probably keep a floor under prices,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “But product demand for both gasoline and diesel are awful.”

Total fuel use over the past four weeks was 5.7 percent below a year earlier, according to department data. By that same measure, distillate demand was 8.5 percent below last year.

Retail Demand

Retail gasoline demand this year through March 16 fell 5.6 percent lower than a year earlier, according to MasterCard Inc.’s SpendingPulse report yesterday. That’s the biggest decline for this time of the year in MasterCard records, dating back to July 2004. Measured on a four-week average, consumption has fallen below year-earlier levels for 51 consecutive weeks.

Prices also fell as mortgage applications in the U.S. slipped for a sixth straight week. The Mortgage Bankers (MBAVBASC) Association’s index declined 7.4 percent in the period ended March 16 from the prior week, the Washington-based trade group reported today.

“Weak economic news, that’s what going to put the brakes on gasoline today,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Gasoline and heating oil have been outperforming crude oil. The crude draw is positive for crude and the cracks are giving some back.”

Crack Spread

The May gasoline crack spread on the Nymex fell $1.46 to $33.23 a barrel. Crude oil inventories declined unexpectedly, dropping 1.16 million barrels to 346.3 million. The survey projected a decline of 2.2 million barrels. Stockpiles at Cushing (DOESCROK), the delivery point for New York futures, fell 0.5 percent.

Supplies (DOESDIST) of distillates, including heating oil and diesel, rose for the first time in six weeks, gaining 1.76 million barrels to 136.6 million. The survey projected a drop of 1.5 million barrels. The increase came as distillate exports fell from a record 1.12 million barrels a day to 956,000, according to preliminary estimates.

“There’s no late-season cold, so distillate demand is weak and you are exporting less,” Pursell said.

Heating oil for April delivery fell 2.05 cents, or 0.6 percent, to settle at $3.2162 a gallon. Prices have gained 9.6 percent this year.

Regular gasoline at the pump, averaged nationwide, rose 1.8 cents to $3.864 a gallon yesterday, according to AAA, the nation’s biggest motoring group. Prices have gained 18 percent this year and are 8.9 percent higher than a year ago. Gasoline peaked in 2011 at $3.985 on May 4.

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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