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Gasoline Slides to Four-Week Low on Forecast for Supply Increase

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Jan. 15 (Bloomberg) -- Gasoline slid to the lowest level in four weeks on speculation that U.S. inventories rose an eighth consecutive week amid seasonally low demand.

Futures sank 1.7 percent as stockpiles probably climbed 2.7 million barrels, according to the median estimate of 11 analysts in a survey by Bloomberg. Demand for the motor fuel slipped to the lowest level in almost a year in the week ended Jan. 4, government data show.

“Gasoline inventories have risen so substantially over the last three months that the market remains under pressure, as demand in January and February is traditionally the weakest of the year,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Gasoline for February delivery fell 4.75 cents to $2.7066 a gallon on the New York Mercantile Exchange, the lowest level since Dec. 18. Volume was 21 percent above the 100-day average at 3:08 p.m.

Gasoline demand slid 6 percent to 8.01 million barrels a day in the week ended Jan 4, according to data from the Energy Department’s Energy Information Administration. Consumption over the past four weeks is down 2.3 percent from the same period a year earlier. Total fuel use sank to 17.8 million barrels a day, the lowest level since March 16.

The EIA is scheduled to report last week’s inventories at 10:30 a.m. tomorrow in Washington. Gasoline supplies in the week ended Jan. 4 were the most since Feb. 25, 2011. Stockpiles have increased 16 percent in seven weeks to the highest seasonal point since the EIA began reporting weekly data in 1990.

Retail Price

The average nationwide retail price for regular gasoline fell 0.7 cent to $3.297 a gallon, AAA said today on its website. That’s the fourth consecutive decline.

“There’s the expectation of another build and we’ve seen increases at the pump and that could reduce demand,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Prices also slipped as President Barack Obama and congressional Republicans appear headed toward a confrontation over raising the debt limit to keep the government running.

The Treasury reached its statutory borrowing limit on Dec. 31 and is using “extraordinary” measures to pay for the government. Those measures will work only until mid-February to early March, Treasury Secretary Timothy F. Geithner said in a letter yesterday to congressional leaders.

Severe Hardship

Geithner warned of severe economic hardship if Congress doesn’t raise the limit, which has been lifted 79 times since 1960, including 49 times under Republican administrations.

“The crisis that will happen if we don’t get the debt ceiling raised and warnings by the Treasury secretary have inflamed the market,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “We also have anemic fuel demand.”

Heating oil for February delivery fell 5.12 cents, or 1.7 percent, to $3.0113 a gallon, the largest decline since Dec. 4.

Distillate inventories probably rose 1.5 million barrels last week, according to the survey.

Distillate stockpiles increased 6.78 million barrels in the week ended Jan. 4 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 most since March 2.

Demand for heating oil and diesel fell 5.2 percent to 3.09 million barrels a day, the least since July 2009.

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