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U.S. Gasoline Futures Drop as Stockpiles Rise More Than Forecast

Gasoline fell after a report that U.S. inventories of the fuel increased last week and amid concern lawmakers will fail to avert automatic tax increases and spending cuts scheduled to take effect tomorrow.

Futures declined for second day as the Energy Department reported that gasoline supplies rose 3.78 million barrels to 223.1 million, the highest level since March. U.S. Senate Majority Leader Harry Reid said “there’s still significant differences” as Democrats and Republicans work to avoid the so- called fiscal cliff of more than $600 billion in tax gains and federal spending reductions.

“Over the last five weeks, the U.S. has built 22.7 million barrels of gasoline and is now for the season at a multiyear high in stocks of not only crude but also of gasoline,” Olivier Jakob, managing director of Zug, Switzerland-based consultants Petromatrix GmbH, said today in a report.

Gasoline for January delivery fell 0.85 cents, or 0.3 percent, to $2.7914 a gallon as of 5:09 a.m. local time on the New York Mercantile Exchange. The more actively traded February futures slipped 0.95 cents to $2.749. January gasoline and heating oil will expire at the close of floor trading today.

Supplies in the Padd 1 region, which covers the U.S. northeast, rose 1.98 million barrels to 51.1 million, the highest level since Aug. 3. The area includes New York Harbor, the delivery point for Nymex futures.

Seasonal High

Total U.S. inventories have climbed 22.7 million barrels, or 11 percent, in five straight weeks of increases. Supplies are at the highest seasonal level since 1993.

Gasoline demand fell 0.1 percent to 8.61 million barrels a day. Consumption over the past four weeks is down 2.8 percent from the same period a year earlier.

Distillate stockpiles in the week ended Dec. 21 increased 2.42 million barrels to 119.4 million. Supplies of ultra-low sulfur diesel rose 2.01 million barrels to 87.1 million, the highest level in 11 weeks.

“It’s a bearish report, product builds in gasoline and distillates, including a 2 million-barrel build in road diesel,” David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston, said on Dec. 28. “Gasoline demand is down on the four-week trailing average.”

Demand for distillate fuels sank 12 percent to 3.71 million barrels a day last week, after jumping 20 percent the previous week. Over the past four weeks, consumption was 6.9 percent below a year earlier.

Heating oil for January delivery was little changed at $3.0455 a gallon. The more actively traded February contract slipped 65 cents to $3.0148.

Largest Backwardation

January heating oil’s premium to the February contract increased to 3.04 cents a gallon, the largest premium for the front-month contract since Feb. 7. The premium, or backwardation, signals tighter inventories or increased demand. When supplies are ample, commodities for near-term delivery typically trade at a discount to later months, or contango.

“With the cold shifting from Europe to the U.S., the Nymex Heating Oil front spreads have continued to tighten and returned to a backwardated structure,” Petromatrix’s Jakob said.

Stockpiles of heating oil in Padd 1 fell 471,000 barrels to 17.8 million, the lowest level since the week ended June 29.

The average nationwide retail price for regular gasoline was little changed at $3.292 a gallon yesterday, AAA said on its website.

To contact the reporters on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net; Rupert Rowling in London at rrowling@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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