Heating Oil, Gasoline Drop on Ship Waiver, Supply Gain

Heating oil and gasoline tumbled after the U.S. eased shipping requirements to increase supply to the Northeast and as terminals and pipelines returned to service after Hurricane Sandy.

The Department of Homeland Security waived the Jones Act, which requires ships moving between U.S. ports to use a U.S.- flagged vessel, increasing the tankers able to move fuel from the Gulf Coast to the East Coast. Colonial Pipeline Co. said its main line that delivers to Linden, New Jersey, and on to terminals around New York Harbor, is resuming deliveries today.

“The supply situation is going to improve quite a bit,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Some of the terminals in Linden have full power. Buckeye restored to full power last night.”

Heating oil for December delivery declined 8.58 cents, or 2.8 percent, to settle at $2.9474 a gallon on the New York Mercantile Exchange, the lowest level since Aug. 6. It was the biggest decline in three months.

Buckeye Partners LP (BPL) said it has resumed operations on most of its pipelines in the Northeast. Buckeye ships fuel from Philadelphia and New York to Pennsylvania and upstate New York, and jet fuel to New York-area airports. Colonial expects to deliver fuel today to Linden on its 825,000-barrel-a-day Line 3.

Hess, Citgo

Hess Corp. said its terminal in Pennsauken, N.J. is beginning barge operations and it’s loading barges from the dock at the Port Reading refinery, which remains shut. Phillip 66’s Bayway refinery in Linden is also idle. Citgo Petroleum Corp. said most of its terminals are operating after several shut on Oct. 29 before the storm.

Gasoline for December delivery fell 6 cents, or 2.3 percent, to settle at $2.5736 a gallon on the exchange.

Futures rose to $2.6545 earlier following a report that hiring in the U.S. increased more than forecast in October, indicating the economy is improving.

“The market tried to push higher after the unemployment report came out,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

The last jobs report before next week’s Presidential election showed 171,000 workers were added to payrolls after a 148,000 gain in September that was more than first estimated, Labor Department figures showed today in Washington. Colonial Pipeline Co. resumed deliveries yesterday from its Linden, New Jersey, terminal.

The jobs increase exceeded the most optimistic forecast in the Bloomberg survey in which the median called for an advance of 125,000. Unemployment rose to 7.9 percent as more people entered the labor force.

Gasoline Inventories

Inventories of gasoline in the East Coast, or Padd 1, fell 202,000 barrels to 47.9 million in the week ended Oct. 26, the Energy Department reported yesterday. Gasoline blending components, which include fuel to be blended with ethanol at terminals before heading to filling stations, fell 216,000 barrels to 40.85 million barrels.

The average nationwide price for regular gasoline at the pump sank 1.1 cents to $3.496 a gallon yesterday, AAA, the largest U.S. motoring organization, said today on its website. That’s the lowest level since July 29. Prices have fallen every day since Oct. 10. The pump price reached a 2012 high of $3.936 on April 4.

Heating oil fell more than gasoline as it followed a decline in European gasoil after European manufacturing output contracted in October, adding to signs a recession in the currency bloc may extend into next year as leaders struggle to tackle the sovereign-debt crisis.

European Manufacturing

A gauge of manufacturing in the 17-nation euro area fell to 45.4 from 46.1 in September, snapping two months of advances, London-based Markit Economics said today. A slower economy in Europe would reduce demand for U.S. diesel exports.

“The general sense of economic uncertainty that has hung over the market is still there,” said McGillian, “The fundamentals of supply and demand remain weak.”

Gasoil for November delivery weakened $17.25 to settle at $925 a ton on the ICE Futures Europe exchange in London.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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