Gasoline jumped to a 10-month high on speculation the U.S. economy is recovering and concern that tensions over Iran’s nuclear program may limit oil supply.
Futures gained 1.4 percent, following crude oil higher. The dollar fell against the euro for the first time in four days, dropping 0.5 percent at 2:52 p.m. in New York. The Labor Department reported yesterday that jobless claims declined last week to the lowest level in four years.
“The dollar keeps weakening and concern about Iran and supply disruptions is back in and you’re getting some short-covering because of it,” said Fred Rigolini, vice president of Paramount Options Inc. in New York.
Gasoline for April delivery rose 4.56 cents to settle at $3.3852 a gallon on the New York Mercantile Exchange. Prices rose 0.8 percent this week, the seventh consecutive weekly increase and longest win streak since futures rose 12 straight weeks through April 13, 2007.
Futures have climbed 26 percent this year, making gasoline the best performer in the Standard & Poor’s GSCI index of 24 commodities.
Gasoline hit the highest level since April 29 as Brent crude for May settlement in London surged on a Reuters report that Iran’s oil exports will fall by 300,000 barrels a day this month. Brent reached $127.06 a barrel before retreating to $125.13. May crude on the Nymex touched $108.25 a barrel, before settling $1.52 higher at $106.87.
Some analysts doubted the report’s impact on the market, citing below-average volume.
“There is no headline that would do this,” said Amrita Sen, a London-based analyst at Barclays Capital. “You’ve got a market that is really nervous on both sides, on the crude side because of lack of capacity and on the gasoline side that demand is falling off and that supplies are getting squeezed and refinery glitches happen all the time.”
Gasoline touched $3.4248 a gallon at 9:55 a.m. before paring gains. Volume was 125,694 as of 4:08 p.m., compared with a three-month average of 140,000.
“I’ve never seen anything like this,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Computer-driven trading is getting a little out of hand. The market just pushed through overnight highs and that triggered algorithms.”
Gasoline surged this year on concern that refinery shutdowns would tighten supply and as concern about tensions over Iran’s nuclear program sent oil higher. Nymex crude is up 8.1 percent this year, while Brent oil in London has jumped 17 percent and is the second-best performer this year on the GSCI.
Prices fell the prior three days on concern that growth in China is slowing and that higher prices at the pump will stifle U.S. fuel demand. A preliminary measure of Chinese manufacturing fell to a four-month low. U.S. average pump prices are up 19 percent this year, according to AAA.
“Iranian tensions will not go away,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “And today is a great example of the market discounting the fact that China’s growth is slowing because the U.S. economy is now taking up the slack.”
The U.S. unemployment rate was 8.3 percent for a second consecutive month in February, down from 9.1 percent as recently as August. U.S. retail sales climbed the most in five months in February. The number of Americans saying the U.S. economy is getting better rose in March to the highest level since 2004, according to Bloomberg’s monthly consumer expectations survey.
“The U.S. economy seems to be getting better,” said Phil Flynn, vice president of research at PFGBest in Chicago.
Heating oil for April delivery gained 3.14 cents, or 1 percent, to settle at $3.2101 a gallon. Prices slipped 2.2 percent this week and are up 9.4 percent in 2012.
Regular gasoline at the pump, averaged nationwide, rose 0.8 cent to $3.889 a gallon yesterday, according to AAA, the nation’s biggest motoring group. Prices are 9.6 percent higher than a year ago. Gasoline peaked in 2011 at $3.985 on May 4.