Gasoline Rises as U.S. Demand Surges to Highest Since August

Gasoline rose as the Energy Department reported that demand for the motor fuel surged last week to the highest level since August.

Futures gained as deliveries to wholesalers increased 482,000 barrels, or 5.6 percent, to 9.13 million barrels a day. Inventories fell unexpectedly even as refiners pushed rates to the highest level since August 2007.

“Demand is up and you’re coming into gasoline season, you have utilization up and products drawing,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston.

Gasoline for July delivery rose 0.52 cent to settle at $2.6554 a gallon on the New York Mercantile Exchange.

Prices touched $2.6922 before paring gains, and heating oil slid to a 16-month low as borrowing costs rose in Italy and Germany and euro-region industrial production fell a second month in April. Greek voters go to the polls June 17 to decide whether to honor that country’s international bailout.

The International Energy Agency reduced its forecast for 2012 crude consumption amid uncertainty whether OPEC would leave output unchanged as the organization is meeting in Vienna to decide on production levels for the second half of the year.

“I don’t think the market has confidence OPEC is going to reduce production,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “The Greek elections are a huge unknown. This market is going to be on the defense. People want to sell rallies.”

Supplies Drop

Gasoline supplies fell 1.72 million barrels last week to 201.8 million, according to department data.

Total product supplied rose 6.5 percent to 19.4 million barrels a day, the highest level since November.

“You need a couple of weeks for this to be a real strong bull run, but it bodes well for summer with reasonably strong demand numbers,” said Sander Cohan, a global transportation fuels analyst and principal with Energy Security Analysis Inc. in Wakefield, Massachusetts. “It will keep gasoline prices from sagging further.”

Refinery utilization rose 1 percentage point to 92 percent. Gasoline production jumped 5.5 percent to 9.55 million barrels a day, the highest level since the week ended Aug. 26. Distillate output increased 1 percent to 4.72 million barrels a day, the highest level since Jan. 6.

Futures were higher before the report’s 10:30 a.m. release in Washington on speculation that a drop in retail sales increases the chances that the Federal Reserve will act to stimulate the economy.

Retail Sales

The Commerce Department reported that sales sank 0.2 percent following a similar drop in April that was previously reported as a gain. The policy-setting Federal Open Market Committee is scheduled to meet June 19-20.

“Weak retail sales and a softening economy increases the chances of quantitative easing,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Inventories of diesel and heating oil fell 63,000 barrels to 120 million. Demand rose 306,000 barrels, or 9.1 percent, to an average 3.69 million barrels a day. Consumption over the past four weeks was 4.6 percent below a year earlier.

Distillate exports totaled 1.12 million barrels a day last week, 30 percent above year-earlier levels.

“Distillate exports is an even more bullish signal,” Cohan said. “Distillate inventories are so low relative to where they’ve been and runs so high, and there is this foreign demand that is sucking fuel out of the country.”

Heating oil for July delivery declined 1.06 cents, or 0.4 percent, to $2.6109 a gallon on the exchange. It was the lowest settlement since January 2011. Crude oil fell 70 cents to $82.62 a barrel, the lowest close for the front-month contract since Oct. 6.

Regular gasoline at the pump, averaged nationwide, fell 0.3 cent to $3.539 a gallon yesterday, according to AAA. It was the lowest price since Feb. 17.

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