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Gasoline Falls on Concern China, Europe Slowdown to Lower Demand

March 22 (Bloomberg) -- Gasoline fell as U.S. fuel demand declined and manufacturing slowed in Europe and China this month, raising concern that global consumption may drop.

Futures sank after the Energy Department reported yesterday that total fuel use over the past four weeks was 5.7 percent below a year earlier. A gauge of European services and manufacturing slipped more than forecast. A preliminary measure of Chinese manufacturing was the lowest in four months, according to HSBC Holdings Plc and Markit Economics.

“Now, we’re seeing signs China is starting to slow, there’s uncertainty in Europe and we’re still not seeing an uptick in fuel demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Gasoline for April delivery fell 1.75 cents, or 0.5 percent, to settle at $3.3396 a gallon on the New York Mercantile Exchange, the third consecutive decline and lowest settlement in five days. Futures have surged 24 percent this year, the best performance in the Standard & Poor’s GSCI index of 24 commodities.

The preliminary 48.1 reading in a Chinese purchasing managers’ index from HSBC Holdings Plc and Markit Economics today is the lowest since November and a decline from a final 49.6 in February.

A euro-area composite index based on a survey of purchasing managers in both industries fell to 48.7 from 49.3 in February, London-based Markit Economics said in an initial estimate today. A reading below 50 indicates contraction.

Manufacturing Decline

“The decline in manufacturing in China, as well as in Europe, is casting a bearish pall on the oil market,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Year-on-year gasoline demand is declining by about 3 percent. What that means is continued lower demand in U.S. as you see slower growth elsewhere.”

The price drop was part of a broader slide in commodities and equities. The GSCI Index fell 1 percent at 2:47 p.m. in New York, while the Standard & Poor’s 500 Index retreated 0.8 percent.

Gasoline deliveries to wholesalers over the past four weeks were 7.8 percent below a year earlier, according to department data. By that same measure, distillate demand was down 8.5 percent.

“Yesterday, you had a DOE report that was awful, and demand for gasoline has been down and falling for a while,” said Peyton Feltus, president of Randolph Risk Management in Dallas. “Europe and China are a giant chunk of the global economy and this is not good.”

Heating oil for April delivery fell 3.75 cents, or 1.2 cents, to settle at $3.1787 a gallon, the fourth straight loss and lowest settlement since Feb. 14. Prices have gained 8.3 percent this year.

Regular gasoline at the pump, averaged nationwide, rose 1.7 cents to $3.881 a gallon yesterday, according to AAA, the nation’s biggest motoring group. Prices have gained 18 percent this year and are 9.4 percent higher than a year ago. Gasoline peaked in 2011 at $3.985 on May 4.

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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