Gasoline Declines Below $3 a Gallon on Concern Recovery Slowing

Gasoline slid below $3 a gallon for the first time since February as slower-than-estimated U.S. job growth and signs of contraction in Europe raised concern that global fuel demand will decline.

Futures sank to a 12-week low and crossed a key technical indicator as U.S. employers added fewer workers than forecast in April and the jobless rate fell as people left the labor force. Euro-region services and manufacturing output contracted more than initially estimated in April, indicating a deepening economic slump.

“The jobless rate improved a little bit because of lack of people participating,” said Phil Flynn, vice president of research at PFGBest in Chicago. “But there’s concerns about the slowdown everywhere and it is making the supply side look very heavy.”

Gasoline for June delivery declined 7.42 cents, or 2.4 percent, to settle at $2.9758 a gallon on the New York Mercantile Exchange, the lowest settlement since Feb. 10. Gasoline lost 7.2 percent this week. It’s the biggest weekly loss since September and follows a 6.1 percent decline in April.

The front-month contract slipped below the 100-day moving average for the first time since Jan. 3.

“That has been considered the big trend changer when it falls below the 100-day,” said Michael Smith, president of T&K Futures & Options in Port Saint Lucie, Florida. “Gasoline has peaked for the year and will probably come back down to $2.50 levels.”

Gasoline last settled below $2.50 on Dec. 19. The price has retreated 13 percent since reaching $3.4166 on March 26.

Payroll Gain

Payrolls climbed 115,000, the smallest gain in six months, after a revised 154,000 rise in March that was more than initially estimated, Labor Department figures showed. The median estimate of 85 economists surveyed by Bloomberg News called for a 160,000 advance.

The jobless rate fell to a three-year low of 8.1 percent and earnings stagnated. The participation rate, which indicates the share of working-age people in the labor force, fell to 63.6 percent, the lowest since December 1981, from 63.8 percent.

“The less-than-expected growth rate and more people leaving the work force is indicative of the potential for continued stagnant demand for petroleum products,” ’’ said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

U.S. gasoline demand over the four weeks ended April 27 was 4.7 percent below a year earlier, according to an Energy Department report released May 2.

Index Declines

A euro-area composite index based on a survey of purchasing managers in both industries dropped to 46.7 from 49.1 in March, London-based Markit Economics said today. That’s the fastest rate of decline since October and below an estimate of 47.4 published on April 23. A reading below 50 indicates contraction.

Gasoline also fell on speculation that supplies will be ample for the summer driving season as a refinery on the East Coast and several in Europe get new owners with plans to keep them in operation.

Delta Air Lines Inc. (DAL) subsidiary Monroe Energy LLC said April 30 that it agreed to buy the ConocoPhillips (COP) operation in Trainer, Pennsylvania. Conoco planned to shut the 185,000- barrel-a-day plant unless a buyer surfaced by the end of May. Delta plans to add capacity.

‘Off Table’

A Vitol Group venture agreed yesterday to buy Petroplus Holdings AG (PPHN)’s refinery in Switzerland as Gunvor Group Ltd. prepared to start operations at its Antwerp plant in Belgium that’s newly acquired from cash-strapped Petroplus. European refiners are the largest source of gasoline imports into New York Harbor.

“The supply risk is off the table now,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “On the demand side, everything is suggesting the global economy is continuing to weaken.”

Regular gasoline at the pump, averaged nationwide, fell 0.1 cent to $3.802 a gallon yesterday, the lowest level since March 14, according to AAA. Prices have dropped 13.4 cents since reaching a 2012 high of $3.936 on April 4. Prices peaked in 2011 at $3.985 on May 5.

“AAA is comfortable saying that we hit our peak for the first half of the year on April 5, a full month before and at 5 cents cheaper than last year’s peak,” Michael Green, a spokesman for AAA in Washington, said in an e-mail.

June-delivery heating oil fell 7.81 cents, or 2.5 percent, to settle at $3.0088 a gallon on the exchange, a 15-week low. Prices lost 5.4 percent this week, the largest weekly retreat since Sept. 23.

-- With assistance from Nidaa Bakhsh in London, Mario Parker in Chicago, Shobhana Chandra in Washington and Simone Meier in Zurich. Editors: Richard Stubbe, Bill Banker

To contact the reporters 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