Gasoline Rises to 12-Week High on Supply Concerns, Brent Rally

Gasoline rose to a 12-week high as refinery shutdowns increased supply concerns and stronger Brent crude boosted the cost of shipments of fuel from abroad and imported oil used at U.S. plants.

Futures gained as a fire that shut the crude unit at Chevron Corp.’s Richmond refinery in California follows outages in the Midwest and Gulf Coast. Prices broke above $3 a gallon for the first time since May as Brent advanced to a two-month month high. North Sea oil shipments are poised to fall 7 percent next month.

“You’ve had a lot of refining issues and now you have West Coast problems,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Brent has been very strong as maintenance has really left a handful of cargos to trade and there’s backwardation in the Brent market.”

Gasoline for September delivery rose 6.91 cents, or 2.4 percent, to $2.9913 a gallon on the New York Mercantile Exchange, the highest settlement since May 11.

Brent oil for September settlement advanced $2.45 to $112 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium over U.S. benchmark West Texas Intermediate oil widened 98 cents to $18.33 a barrel.

“The Brent spread moving above $18 is why you’re seeing products moving out more,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Technical Rally

Gasoline touched $3.0088 as the front-month contract traded above the 100-day moving average for the first time since May 4.

“Breaking through the 100-day is huge from a technical view,” said Michael Smith, president of T&K Futures & Options in Port Saint Lucie, Florida. “It wouldn’t surprise me to see it run up another 20 cents just like that.”

Chevron’s 240,000-barrel-a-day refinery shut its crude unit after a fire yesterday and has no estimate for restarting it. Hurricane Ernest developed today in the Caribbean off the eastern coast of Mexico’s Yucatan Peninsula, according to the National Weather Service. A disruption to Mexican oil output could boost demand for fuel exports from the Gulf Coast.

“There could be some Mexican production shut down due to the hurricane,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. The fire at Chevron Richmond “could mean a large percent of West Coast refining capacity is offline in the aftermath of all the problems we had in the Chicago Midwest area.”

PADD 5, which covers the U.S. West Coast, has 3.03 million barrels a day of operable refinery capacity, or 18 percent of total U.S. capacity, according to Energy Department data. The Richmond plant is about 7.9 percent of West Coast refining.

Heating oil for September delivery rose 5.71 cents, or 1.9 percent, to $2.998 a gallon on the exchange and touched $3.0085, the highest intraday price since May 7.

Regular gasoline at the pump, averaged nationwide, gained 1.5 cents to $3.634 a gallon yesterday, AAA data showed. That’s the highest price since May 25. Prices have fallen 7.7 percent from a 2012 high of $3.936 on April 4, according the nation’s largest motoring organization.