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Gasoline Slips as Japan Factory Output Falls, Dollar Gains

Gasoline and heating oil slid after a report that Japanese factory production declined and as a stronger dollar reduced the investment appeal of commodities.

Futures fell as Japanese factory output slipped 4 percent in September from the previous month, the trade ministry said in a report in Tokyo today. The decline in prices followed a 3.4 percent rally yesterday after a euro-region agreement to boost a bailout fund and as the U.S. economy grew in the third quarter at the fastest pace in a year.

“Yesterday we were euphoric with the GDP and the Greece deal,” said Phil Flynn, vice president of research at PFGBest in Chicago. “But any weakness in economic data, you’re going to pull back a little bit and wonder if we came up too fast.”

Gasoline for November delivery fell 5.98 cents, or 2.2 percent, to settle at $2.6822 a gallon. on the New York Mercantile Exchange. The contract, which expires Oct. 31, lost 0.1 percent this week and has gained 2.1 percent in October.

The more actively traded December contract dropped 6.11 cents, or 2.3 percent, to $2.6461 a gallon.

Futures also retreated as Brent crude in London declined. Gasoline and heating oil have been tracking Brent as East Coast refiners process oil prices off the European benchmark crude.

Brent for December settlement fell 1.9 percent to $109.91 a barrel on the ICE Futures Europe Exchange. The premium of Brent over U.S. West Texas Intermediate on Nymex narrowed $1.53 to $16.59.

Brent-WTI Spreads

“Products are taking direction from the way Brent is trading and we’re seeing further unwinding of the Brent-WTI spreads,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

The premium of December-delivery gasoline over WTI, or the crack spread, lost $1.92 to $17.82 a barrel while the December heating oil crack spread narrowed 93 cents to $35.47 on the exchange.

Japan’s industrial production fell more than the 2.1 percent decline projected in a survey by Bloomberg News.

“Manufacturing equals oil and demand and that spooked the market,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

November-delivery heating oil declined 3.92 cents, or 1.3 percent to settle at $3.0592 a gallon on the exchange. Prices rose 1.4 percent this week and are up 9.5 percent this month. The December contract fell 3.73 cents, or 1.2 percent, to $3.0664 a gallon.

Regular gasoline at the pump, averaged nationwide, rose 0.4 cent to $3.448 a gallon yesterday, according to AAA data.

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