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Gasoline Futures Sink to Nine-Month Low on Government Shutdown

By Barbara Powell - 2013-10-01T14:25:31Z

Gasoline fell to a nine-month low on concern that the economy will weaken and fuel demand will decline as the U.S. government begins its first partial shutdown in 17 years.

Prices sank as much as 1.4 percent. The shutdown, which comes after Congress failed to break a budget impasse by a midnight deadline, may idle as many as 800,000 federal employees, close national parks and halt some services. The shutdown will cost the U.S. at least $300 million a day in lost economic output at the start, according to IHS Inc.

“The market is waiting to see if there will be a quick resolution,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If the stalemate continues the market will come under greater bearish pressure as the effects start to filter through the economy.”

Gasoline for November delivery fell 2.1 cents, or 0.8 percent, to $2.6072 a gallon at 10:12 a.m. on the New York Mercantile Exchange and touched $2.5987, the lowest intraday level since Dec. 11. Trading volume was 32 percent below the 100-day average for the time of day.

The shutdown follows Congress’s failure to pass a stopgap spending bill before the country’s fiscal year ended yesterday. Congressional leaders have scheduled no further budget negotiations, raising concerns among some lawmakers that the shutdown could bleed into the more consequential fight over how to raise the U.S. debt limit to avoid a first-ever default after Oct. 17.

Crack Spreads

The motor fuel’s crack spread versus West Texas Intermediate crude narrowed 14 cents to $7.91 a barrel. The fuel’s premium over Brent fell 26 cents to $1.75.

Pump prices, averaged nationwide, fell 0.6 cent to $3.393 a gallon, the lowest level since Jan. 28 and 38.9 cents below a year ago, Heathrow, Florida-based AAA said today on its website.

Ultra-low-sulfur diesel for November delivery fell 1.4 cents, or 0.5 percent, to $2.9575 a gallon on trading volume that was 4.2 percent BELOW the 100-day average.

ULSD’s crack spread versus WTI widened 13 cents to $22.60 a barrel. The premium over Brent increased 3 cents to $16.46.

To contact the reporter on this story: Barbara Powell in Houston at bpowell4@bloomberg.net

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