Gasoline Surges as Refinery Shutdowns Reduce U.S. Supply

Gasoline surged as refinery and pipeline shutdowns increased concern that supplies aren’t adequate to meet demand.

Futures rose 5.1 percent as Valero Energy Corp. halted spot sales in California, citing tight supplies. Exxon Mobil Corp. reduced output at its Baytown, Texas, plant, the largest in the U.S., after a fire. Colonial Pipeline Co., operator of the largest conduit between U.S. Gulf Coast oil refiners and East Coast markets, said today it shut two fuel lines after a leak.

“There’s no supply and it’s obvious, especially in California,” said Andrew Lebow, senior vice president for energy at Jefferies Bache LLC in New York. “If something else goes wrong, we’ll be in an even more precarious position.”

Gasoline for November delivery rose 14.34 cents, or 5.1 percent, to settle at $2.9429 a gallon on the New York Mercantile Exchange. It was the first increase this week.

Stockpiles on the East Coast, which includes New York Harbor, the delivery point for futures contracts, fell 1.4 percent to the lowest since October 2008 last week, Energy Department data show.

California-blend gasoline inventories held by refiners in that state last week were 9.1 percent below a year earlier, state data show.

Costco Wholesale Corp.’s warehouse store in Simi Valley, 40 miles (64 kilometers) northwest of Los Angeles, ran out of regular gasoline yesterday and was selling premium fuel at the price of regular, Jeff Cole, Costco’s vice president of gasoline, said in an interview. The company hasn’t been able to find enough unbranded summer-grade gasoline to keep its stations supplied, he said.

Exxon Baytown

In Texas, Exxon shut a diesel hydrotreater after yesterday’s fire at its Baytown refinery. Colonial said today it shut two fuel lines between Atlanta and Nashville, Tennessee, after a leak. November gasoline’s premium to December widened 2.71 cents to 14.45 cents a gallon.

“Both events served to remind traders how fragile the balance is for refined products,” Lebow said.

Futures also gained after European Central Bank President Mario Draghi said the bank is ready to buy government bonds and European policy makers held the benchmark rate at a historic low of 0.75 percent. Draghi, speaking today at a press conference in Ljubljana, Slovenia, also said the euro is “irreversible.”

“While there’s still ongoing concerns about what’s going on in Europe, Draghi gave the market a little bit of a boost today,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Euro Rises

Draghi’s remarks boosted the euro and it advanced 0.8 percent against the dollar at 3:35 p.m. New York time. A weaker dollar increases the investment appeal of commodities. The Standard & Poor’s GSCI Spot Index of 24 raw materials jumped 2.5 percent.

November-delivery heating oil advanced 12.2 cents, or 4 percent, to $3.1884 a gallon, the highest settlement for the front-month contract since Sept. 14.

“With that diesel hydrotreater down, heating oil is more at risk,” Flynn said.

Regular gasoline at the pump, averaged nationwide, rose 0.2 cent to $3.784 a gallon yesterday, AAA data show. It was the second straight increase.

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