Gasoline Slips as Federal Reserve May Ease Stimulus Efforts

Jan. 4 (Bloomberg) -- Gasoline slid as the Federal Reserve signaled an end to bond purchases and labor market gains gave the central bank more reason to ease stimulus efforts, threatening to limit economic growth and fuel demand.

Futures fell after Fed officials said in the minutes of a December policy meeting released yesterday that they will probably end their $85 billion monthly bond-buying program this year. U.S. payrolls rose by 155,000 workers last month and the jobless rate matched a four-year low, Labor Department figures showed today. Losses deepened after the Energy Department said gasoline supply jumped to the highest since July.

“The Fed minutes really pulled the plug on a lot of commodities yesterday, and a better-than-expected jobs number is bearish because it increases pressure to remove extra stimulus,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Gasoline for February delivery fell 3.34 cents, or 1.2 percent, to $2.7643 a gallon on the New York Mercantile Exchange. Prices slipped 1.3 percent this week, the first loss in four weeks.

The median estimate of 82 economists surveyed by Bloomberg called for an increase of 152,000 jobs in December. The unemployment rate held at 7.8 percent after the November figure was revised up from a previously reported 7.7 percent.

Fed Chairman Ben S. Bernanke said on Dec. 12 that the Fed will continue its bond-buying program until officials see “substantial improvement in the outlook for the labor market.”

The Fed minutes yesterday “raised expectations that the easing policies will taper off this year,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Gasoline Inventories

Gasoline supplies rose 2.57 million barrels to 225.7 million, the highest level since March 16. Inventories have increased 13 percent in six weeks and are at the highest seasonal level since the department began reporting weekly data in 1990.

Gasoline demand fell 1.1 percent to 8.52 million barrels a day. Consumption over the past four weeks is down 2.3 percent from the same period a year earlier. Days of supply increased to 26.4, the highest level since March 23, department data show.

Refinery utilization rose 0.1 percentage point to 90.4 percent, 5.4 percentage points higher than a year earlier.

“Gasoline inventories continue to rise,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Refinery utilization continues to run at 5 percentage points higher than at this time last year, and turning a crude oil surplus into a product surplus.”

Distillate Supply

Distillate inventories in the week ended Dec. 28 rose 4.57 million barrels to 124 million, the highest level in three months and biggest one-week increase since November 2011. Supplies of ultra-low sulfur diesel jumped 6.52 million barrels to 93.6 million.

Demand for heating oil and diesel fell 12 percent to 3.23 million barrels a day, the lowest since Aug. 31. Consumption has sunk 23 percent in two weeks.

Heating oil for February delivery slipped 0.74 cent to settle at $3.0177 a gallon on the exchange. Futures declined 0.9 percent this week, the first loss in four weeks.

The average nationwide retail price for regular gasoline rose 0.3 cent to $3.295 a gallon, AAA said today on its website.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net

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