Gasoline fell for the first time in three days after the Energy Department said stockpiles of the motor fuel jumped to a 22-month high.
Futures slid on the report that gasoline supplies rose 7.41 million barrels to 233.1 million in the week ended Jan. 4, the highest level since Feb. 25, 2011. Supplies have increased 16 percent in seven weeks and are at the highest seasonal point since the department began reporting weekly data in 1990.
“You can’t overreact to the big numbers, but this is bearish,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
Gasoline for February delivery fell 1.55 cents, or 0.6 percent, to settle at $2.7789 a gallon on the New York Mercantile Exchange. Prices touched $2.7528 after the inventory report was released at 10:30 a.m. in Washington.
The median estimate of 11 analysts surveyed by Bloomberg forecast a 2.5 million-barrel increase.
Gasoline demand slid 6 percent to 8.01 million barrels a day, the lowest level in almost a year. Consumption over the past four weeks is down 2.3 percent from the same period a year earlier. Total fuel demand sank to 17.8 million barrels a day, the lowest level since March 16.
February gasoline’s discount to the March contract widened 0.27 cent to 1.09 cents, the biggest gap for the front-month contract since Feb. 29. When supplies are ample, commodities for near-term delivery typically trade at a discount to later months, or contango.
“Buyer beware on the long side,” Chirichella said. “I don’t see where upside momentum could be coming from.”
Distillate inventories in the week ended Jan. 4 rose 6.78 million barrels to 130.7 million, the highest level since April 6. Supplies of ultra-low sulfur diesel jumped 6.22 million barrels to 99.9 million, the highest level since March 2.
Demand for heating oil and diesel fell 5.2 percent to 3.09 million barrels a day, the lowest level since July 2009. Consumption over the past four weeks was 5 percent below a year ago.
Heating oil for February delivery rose 1.14 cents, or 0.4 percent, to settle at $3.0699 a gallon.
Heating oil gained on speculation that higher gasoil prices in Europe will attract diesel shipments from the U.S.
Gasoil for January delivery, which expires today, advanced $3.25 to settle at $948.50 a metric ton on the ICE Futures Europe exchange in London, the highest price since Dec. 3.
“Heating oil is probably being drawn up by the gasoil in Europe,” Lipow said.
Demand for heating fuel may rise. Weather in the eastern U.S. may turn much colder at the end of January and stay that way into February, said Jon Gottschalck, head of forecast operations for the U.S. Climate Prediction Center.
“The prediction for a long freeze is helping heating oil,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London.
The average nationwide retail price for regular gasoline gained 0.4 cent to $3.304 a gallon, AAA said today on its website.