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Gasoline Slides as Japan Quake Shuts Refineries, Oil Tumbles

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March 11 (Bloomberg) -- Gasoline slid, following crude oil lower, after Japan’s strongest earthquake on record forced several oil refineries to close and lowered fuel demand.

Futures sank for a second day as Japanese refiners including JX Nippon Oil & Energy Corp. and Cosmo Oil Co. shut more than 820,000 barrels a day of capacity, or about 19 percent of the country’s total processing capacity. Protesters in Saudi Arabia, the world’s largest oil exporter, failed to congregate for a so-called Day of Rage after police were deployed.

“The market going into the weekend is cautious,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “There’s no real shortage of oil associated with Libya. People are still cautious because of the uncertainty with Saudi Arabia. You’ve still got sovereign debt issues in Europe, and Japan is a big consumer of oil.”

Gasoline for April delivery lost 3.19 cents, or 1.1 percent, to settle at $2.9877 a gallon on the New York Mercantile Exchange, Prices fell for the first time in five weeks, dropping 1.9 percent.

The magnitude-8.9 earthquake struck off the coast of Sendai, a city of 1 million in northeast Japan, unleashing a tsunami as high as 10 meters (33 feet) that engulfed towns along the coast and killed hundreds.

Japan Consumption

Japan consumed 4.42 million barrels a day of crude in 2010, according to data from the International Energy Agency’s Feb. 10 monthly Oil Market Report. China used 9.39 million and the U.S. 19.25 million, the agency said.

“If there’s a lot of damage to refineries, for the time being, supplies of oil that would normally be consumed by Japan will be on the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

The U.S. Coast Guard temporarily halted oil and hazardous liquid shipments to San Francisco and Oakland, California, ports after a tsunami warning was issued for the West Coast.

Futures touched $2.9425 before paring losses after Aad van Bohemen, the head of emergency policy for the IEA, said he doesn’t expect Japan to use its emergency crude and oil-product stockpiles. Many of the refineries that were shut as a precaution “can come back online” after initial safety assessments are conducted, van Bohemen said by telephone. “So far as we can see, the impact on the oil sector is limited.”

President Barack Obama said he’s prepared to tap the nation’s strategic oil reserve to deal with any supply disruptions from political unrest in Libya and the Middle East. He said the government could begin pumping from the reserve within a few days.

Libyan Unrest

Libyan forces loyal to Colonel Muammar Qaddafi bombarded rebels today in control of oil installations in Ras Lanuf after anti-regime forces said they would seek to secure energy fields and infrastructure.

In Saudi Arabia, the world’s largest oil exporter, opposition activists had called for a “Day of Rage” today to demand more democracy in the country, an absolute monarchy.

“The Day of Rage never happened, giving the market a chance to catch its breath,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.

The Libyan uprising followed popular protest movements that ousted Tunisian President Zine El Abidine Ben Ali and Egyptian President Hosni Mubarak. There have also been anti-government demonstrations across the region.

Brent crude for April settlement declined $1.59 to $113.84 a barrel on London’s ICE Futures Europe exchange. Products futures are vulnerable to changes in Brent because refineries supplying fuel to New York Harbor, the delivery point for heating oil and gasoline futures, process crude grades priced relative to the European benchmark.

Nymex April crude sank $1.54 to $101.16 a barrel.

Heating oil for April delivery dropped 1.59 cents, or 0.5 percent, to settle at $3.029 a gallon. Prices fell 2 percent this week.

Regular gasoline at the pump, averaged nationwide, advanced 1.3 cents to $3.542 a gallon yesterday, AAA said on its website, the highest level since Oct. 4, 2008.

To contact the reporter 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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