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Gasoline Rises Most in 3 Years on Tight East Coast Supply

Sept. 28 (Bloomberg) -- Gasoline rose the most in three years as scarce available supply in the New York Harbor area forced the expiring October-delivery contract to a record premium over November.

Prices jumped 6.3 percent as refineries in Canada, Wales and the Netherlands that supply the U.S. East Coast have reduced fuel production. Supplies in the region, which includes New York Harbor, the delivery point for futures contracts, are the lowest in almost four years, Energy Department data show

“There were shorts who were waiting for a better time to get out of the October futures market, but it continued to go against them as a result of low RBOB stocks and refining problems making supplies tight,” said Andy Lipow, president of Houston-based Lipow Oil Associates LLC.

Gasoline for October delivery rose 19.77 cents to $3.342 a gallon on the New York Mercantile Exchange, the highest settlement price since April 13. The increase was the largest since July 29, 2009.

Futures gained 7.6 percent for the month and 23 percent this quarter.

The more actively traded November contract gained 2.29 cents, or 0.8 percent, to $2.9201. The premium of October over November increased to 42.19 cents a gallon, the widest gap between the front two contracts.

Futures Issue

The jump in October futures prices will have little to no impact on pump prices passed on to consumers, Lipow said.

“This is really a futures contract issue,” he said.

It appeared as if someone wouldn’t be able to deliver their October contracts on the last available day, so they had to buy them back, said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

“The people who were selling to them knew they would pay almost up to any level so they could get their contracts back,” he said. “It’s one of the risks of being involved in closing day trading.”

Gasoline futures had risen 7.8 percent since Sept. 24 coming into trading today as Atlantic Basin refinery maintenance raised concerns about gasoline supply.

U.S. gasoline inventories fell 481,000 barrels to 195.8 million barrels last week, the ninth consecutive decline and the lowest level since October 2008, according to department data. Output slid 2.1 percent to the lowest level in 10 weeks.

Refinery Maintenance

Royal Dutch Shell Plc’s 400,000-barrel-a-day Pernis plant in the Netherlands is conducting maintenance until early November. Irving Oil Corp. is performing maintenance on sections of the 298,800-barrel-a-day Saint John refinery in New Brunswick, which exports more than half of its output to the U.S. East Coast. Valero Energy Corp. shut all the main production units at its Pembroke refinery in Wales while the plant’s only crude unit undergoes an eight-week turnaround.

“The underlying reason for the gasoline rally is the refinery maintenance program,” McGillian said. “Concerns about really tight supplies are going to hang over the market for the next couple months.”

October-delivery heating oil rose 1.21 cents, or 0.4 percent, to $3.1694 a gallon on the exchange. Prices were little changed this month and have gained 18 percent since June. The November contract increased 0.84 cent, or 0.3 percent, to $3.1592.

Regular gasoline at the pump, averaged nationwide, fell 0.8 cent to $3.787 a gallon yesterday, AAA data show. Prices have fallen 13 of the past 14 days, declining 2.2 percent in that span. Prices reached a 2012 high of $3.936 on April 4.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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