Gasoline Futures Jump to Four-Month High; Contango Narrows

Gasoline jumped to a four-month high as March contract’s discount to April futures narrowed for the first time in four days.

The March-delivery gasoline gained 2 percent. The March- April spread shrank 2.44 cents to 21.2 cents, after reaching the widest in seven years yesterday for the contracts nearest to expiration on speculation winter-grade supply is ample. April futures represent summer-grade fuel, which costs more to refine and blend. East Coast supplies rose last week while total U.S. inventories fell, Energy Information Administration data show.

“It’s surprising that gasoline continues to rally,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “National inventories drew this week due to the lower inventories in PADD 5 while RBOB on the East Coast in PADD 1 built substantially.”

Gasoline for March delivery advanced 6.11 cents to $3.0965 a gallon at 12:21 p.m. on the New York Mercantile Exchange on volume that was 50 percent above the 100-day average. Gasoline has been the top performer this year on the Standard & Poor’s GSCI commodity index.

The contracts are based on reformulated gasoline, or RBOB. Gasoline stockpiles in the East Coast, or PADD 1 region, which includes the Nymex delivery point in New York Harbor, jumped 1.7 million barrels to the highest level since March 16 last week, according to the EIA, the Energy Department’s statistical arm. Total U.S. supplies fell 803,000 barrels to 233.2 million.

April-September

April gasoline’s premium over September widened 2.46 cents to 27.38 cents a gallon, indicating concern that supplies will drop heading into the peak period for U.S. driving demand, which typically starts in late May.

“The concern specifically is a shortage of blending components, which you need more for summer,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. “Petrochemicals are running at max capacity because of cheap natural gas and they’re also looking for cheap feed stock.”

Hess Corp. will shut its Port Reading, New Jersey, plant later this month. Lipow estimated that the refinery can produce 50,000 barrels a day of the motor fuel and represents 7.7 percent of PADD 1 gasoline-making capacity.

“The market is expecting tight RBOB supplies in the Harbor because Hess Port Reading will be shut down and it doesn’t see much resupply of summer-grade RBOB out of Europe this summer,” Lipow said.

Heating oil for March delivery rose 0.48 cent to $3.2236 a gallon on the Nymex. on volume that was 8.4 percent above the average.

Inventories of distillate fuels, including heating oil and diesel, declined 3.68 million barrels to 125.9 million, the EIA reported. Heating oil supplies in PADD 1 increased 430,000 barrels.

The retail price for regular gasoline, averaged nationwide, rose 1 cent to $3.628 a gallon, the highest level since Oct. 22, AAA said today on its website. Costs have climbed 10 percent this year and are 11.5 cents above a year ago.

To contact the reporter on this story: Barbara 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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