Gasoline advanced to the highest level in 10 months after Federal Reserve Chairman Ben S. Bernanke said accommodative monetary policy is needed for the unemployment rate to continue to decline.
Futures rose as Bernanke, in a speech today in Arlington, Virginia, said “further significant labor market improvements will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued accommodative policies.” The U.S. unemployment rate held at a three-year low of 8.3 percent in February, according to Labor Department data.
“It’s clear they’re keeping the low-interest rate policy,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Gasoline for April delivery advanced 3.14 cents, or 0.9 percent, to $3.4166 a gallon on the New York Mercantile Exchange, the highest settlement since April 29.
“We cannot yet be sure that the recent pace of improvement in the labor market will be sustained,” Bernanke said.
The Federal Open Market Committee upgraded its economic outlook assessment at its March 13 meeting, while repeating that high unemployment and subdued inflation are likely to warrant exceptionally low interest rates at least through late 2014.
The Fed has kept the federal funds rate near zero and purchased $2.3 billion in housing and government debt during two rounds of so-called quantitative easing to speed the U.S. recovery from recession.
“Bernanke is saying the foot is going to be on the accelerator, giving the market reason to believe there’s a possibility of rates staying low for longer than expected and leaving the door open for a possible QE3,” said Phil Flynn, vice president of research at PFGBest in Chicago.
Gasoline’s gains were part of a broader rally in equities and commodities, with the Standard & Poor’s 500 Index gaining 1.2 percent at 2:59 p.m. in New York and the S&P’s GSCI index of 24 materials advancing 0.3 percent.
Gasoline, with its 27 percent surge this year, is the best performer in the GSCI. Heating oil has increased 10 percent and crude oil is up 8.3 percent.
Futures widened gains after a report that the number of contracts signed to buy houses rose 14 percent from a year earlier and held near an almost two-year high. The index of pending home sales fell 0.5 percent to 96.5 in February after a 2 percent increase the prior month, the National Association of Realtors said today in Washington. January’s reading of 97 was the highest since April 2010.
“The economy is just starting to take off, and Bernanke is saying they will do whatever it takes to keep that momentum, including quantitative easing,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.
Prices also rose after ConocoPhillips had an upset in a catalytic cracker at its 238,000 barrel-a-day Bayway refinery in Linden, New Jersey. Linden is located along New York Harbor, the delivery point for Nymex gasoline and heating oil futures.
“Anytime you have a cat go down in the Northeast in an area where we’ve seen numerous refinery shutdowns, that impacts local supply,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Along the U.S. East Coast, Sunoco Inc. and ConocoPhillips last year idled money-losing refineries in Pennsylvania with a combined capacity of 363,000 barrels a day, or 24 percent of the region’s capacity, according to the Energy Department. Sunoco has said it will shut its 335,000-barrel-a-day Philadelphia refinery by July unless it can attract a buyer.
Heating oil for April delivery gained 1.87 cents, or 0.6 percent, to settle at $3.2288 a gallon on the Nymex.
Regular gasoline at the pump, averaged nationwide, rose 0.3 cent to $3.897 a gallon yesterday, according to AAA, the nation’s biggest motoring group. Prices have surged 19 percent this year and are 8.8 cents below 2011’s peak of $3.985, which was reached on May 4.
Hedge funds cut bullish gasoline bets for a second week amid rising prices at the pump and lower demand. Money managers reduced wagers on higher gasoline prices by 6.4 percent in the seven days ended March 20, the Commodity Futures Trading Commission’s Commitment of Traders report on March 23 showed. Net-long positions declined to the lowest level since Jan. 31.
Retail demand this year through March 16 was 5.6 percent below the same period in 2011, according to MasterCard Inc.’s SpendingPulse report on March 20. That’s the biggest decline for this time of the year in SpendingPulse records, dating back to 2004.
“We’re feeling the most sticker shock we have for a while and we’ve already seen demand fall dramatically,” Flynn said.