Gasoline Sinks as Demand Falls, Plants Start After Isaac

Gasoline tumbled to a one-week low as consumption declined and refinery startups indicated fuel production will increase, boosting supplies.

Futures fell 1.3 percent as demand slid 5.3 percent last week, according to Energy Department data. Gulf Coast refineries are restarting after Hurricane Isaac. Philadelphia Energy Solutions has started a fluid catalytic cracker at the largest plant near New York Harbor, the delivery point for Nymex futures. Prices sank as much as 3 percent after the Federal Reserve announced plans for further economic stimulus.

“We lost nearly 500,000 barrels a day in demand last week,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “As we move further away from driving season, the expectation is demand is going to continue to taper off and there is going to be ample gasoline.”

October-delivery reformulated gasoline, or RBOB, fell 3.94 cents to settle at $2.9622 a gallon on the New York Mercantile Exchange. Gasoline’s discount to October heating oil widened 3.55 cents to 24.91 cents, its worst performance since Feb. 7.

Gasoline touched $2.9126, the lowest level since Aug. 6, after the Fed said it will expand its holdings of long-term securities with open-ended purchases of $40 billion of mortgage debt a month in a bid to boost growth and reduce unemployment. Commodities have gained in recent weeks amid growing expectation of additional stimulus.

“The Fed statement is muted and people may be taking profit off the table,” Hamza Khan, an analyst at the Schork Group Inc., a consulting company in Villanova, Pennsylvania.

Motiva Norco

Motiva Enterprises LLC is running its Norco, Louisiana, refinery at normal rates for the first time since Aug. 30, according to two people familiar with refinery operations. Valero Energy Corp. (VLO) said today it has returned its St. Charles refinery to planned rates.

Delta Air Lines Inc.’s Monroe Energy LLC subsidiary will soon produce fuel at the Trainer, Pennsylvania, plant it bought from ConocoPhillips, adding additional supply to the market.

“Demand for gasoline fell off substantially as we have exited the summer gasoline driving season,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “With the return of the Sunoco cat and anticipated start of the Monroe Trainer refinery, the market expects RBOB supplies to improve substantially.”

Lower Demand

Consumption typically drops after the Labor Day holiday, which fell this year on Sept. 3. Emissions specifications in fuel loosen after the summer, making the fuel cheaper to produce and expanding available supply.

Regular gasoline at the pump, averaged nationwide, increased 1.1 cents to $3.869 a gallon yesterday, AAA data showed. That’s the highest level since April 20. The year-to- date high is $3.936, reached on April 4.

Heating oil for October delivery fell 0.39 cent to settle at $3.2113 a gallon on the exchange.

Prices earlier touched $3.248, the highest intraday level since April 3, as distillate supplies are 19 percent below year- earlier levels and the lowest for this time of year since 2004, according to Energy Department data.

“Heating oil is being supported by relatively low inventories,” Lipow said. “For now, the oil market backing off on less-than-expected quantitative easing.”

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.

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