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Gasoline Futures Rise as Refinery Maintenance Cuts Fuel Output

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Jan. 7 (Bloomberg) -- Gasoline futures rose as several refineries cut production of transportation fuels during maintenance.

Gasoline gained 0.5 percent as Motiva Enterprises LLC shut a 325,000-barrel-a-day crude unit at its Port Arthur, Texas, refinery. BP Plc began work on the fluid catalytic cracker at its Carson plant in California and started the a unit at its Texas City refinery after an unplanned shutdown Jan. 6. Phillips 66 reported emissions Jan. 5 at its 238,000-barrel-a-day Bayway plant in New Jersey.

“One thing we’ve been seeing is that refineries have been running at such high rates,” Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Oil products are outpacing underlying crude prices, which would have you believe it’s a refinery-related issue.”

Gasoline for February delivery rose 1.31 cents to settle at $2.7774 a gallon on the Nymex after touching $2.7433 earlier. Volume was 15 percent below the 100-day average.

Crude oil futures gained 10 cents to settle at $93.19 a barrel on the Nymex.

Gasoline dropped earlier on concerns that U.S. budget negotiations won’t yield an agreement, which could curb economic growth and fuel demand at a time when inventories are at 10-year seasonal highs.

Gasoline inventories increased 2.57 million barrels to 225.7 million in the week ended Dec. 28, the Energy Department reported on Jan. 4.

Relief Rally

“The end-of-the-year rally was based on relief that budget negotiations didn’t go over the cliff,” Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York, said in a phone interview. “But there’s still an overhang. Now we’ve got to start talking about the debt ceiling. That’s going to be an overriding issue, unfortunately, for all of us.”

Heating oil rose on speculation diesel demand may increase if barge shipping on the Mississippi River is curtailed by low water levels.

The U.S. Army Corps of Engineers has been undertaking emergency dredging and rock-removal work to deepen the Mississippi River shipping channel to avert a shutdown of barge traffic this month. The Corps expects to maintain at least a 10-foot river depth near Thebes, Illinois, through the month, Major General John Peabody, commander of the U.S. Army Corps of Engineers’ Mississippi Valley division, said today.

“The market rallying is a little surprising,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s keeping one eye on WTI and Brent prices, and the other is looking to see if there are signs of increased demand, especially the diesel market to see if there’s better trucking demand from possible navigation problems on the rivers.”

Heating oil for February delivery rose 1.44 cents, or 0.5 percent, to $3.0321 a gallon on the Nymex. Volume was 22 percent below the average.

Gasoline at the pump, averaged nationwide, fell 0.2 cent to $3.297 a gallon, AAA said on its website today.

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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