Gasoline extended the longest rally since July 2009 on speculation that refinery repairs and a pending plant closing will reduce East Coast stockpiles that are the lowest seasonally since 2004.
Futures rose a 10th straight day as gasoline supply in PADD 1 was 10 percent below the five-year average last week, government data show. Hess Corp. will shut its New Jersey plant in February. Philadelphia-area refineries that supply New York Harbor have units down for repairs. The gasoline crack spread on Nymex jumped to the highest level since October.
“The market is running scared here,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “We have ongoing refinery outages, we’re going into turnarounds and we’ve all got an eye ahead on Memorial Day. Where is this supply to come from?”
Gasoline for February delivery climbed 6.53 cents, or 2.2 percent, to $3.0387 a gallon on the New York Mercantile Exchange. It was the biggest gain since Dec. 26 and highest settlement since Sept. 28.
Prices are up 8.1 percent this month and have advanced 12 percent since Jan. 15, making gasoline the top performer on the Standard & Poor’s GSCI commodity index during that period. The contract is for reformulated gasoline to be blended with ethanol, or RBOB.
Volume was 41 percent above the 100-day average at 3:03 p.m. The more actively traded March gasoline increased 5.69 cents to $3.0332. February gasoline and heating oil contracts will expire at the end of floor trading tomorrow.
February futures were at a 0.55 cent premium to March contracts, the first time since Jan. 3 that the spread has been in backwardation, indicating lower supplies or higher demand. Prices extended gains after the U.S. Energy Information Administration’s weekly inventory report.
“All of this is anxiety over the future,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “Look at how February has performed. That’s a function of short-covering in the paper market and suggests a bit of hysteria.”
The March gasoline crack spread versus West Texas Intermediate widened $2.01 to $29.45 a barrel, and gained $1.84 to $12.49 against Brent crude on ICE Futures Europe.
“There’s a potential short squeeze in RBOB ahead of expiration, the Port Reading news and today, although PADD 1 inventories built, gasoline drew counter-seasonally and the PADD 1 build was less than the increase in imports,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London.
Total U.S. gasoline inventories fell 956,000 barrels to 232.3 million barrels in the seven days ended Jan. 25, according to EIA data. The median of analyst estimates compiled by Bloomberg was for an increase of 1 million barrels. Supplies in PADD 1 increased 1.24 million barrels to 55.2 million as imports to the region rose 47 percent to 609,000 barrels a day, the most since the week ended Sept. 7.
Refineries processed 1.06 million barrels a day of crude and other feedstocks, down 2.1 percent from a week earlier.
Philadelphia Energy Solutions will shut the Girard Point section of its plant, the largest near the New York trading hub, this month for 60 days of work. A fluid catalytic cracker at Delta Airlines Inc.’s Trainer, Pennsylvania, refinery has been shut for repairs since December.
“Gasoline is supported by the supply situation in the Northeast,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Hess said the 70,000-barrel-a-day Port Reading refinery will be shut because it has lost money in two of the past three years. The plant was “challenged” financially by a requirement to spend money to comply with environmental regulations for low-sulfur heating oil and “the weak forecast for gasoline refining margins,” the company said.
Lipow estimated that the refinery can produce 50,000 barrels a day of gasoline and represents 7.7 percent of PADD 1 gasoline-making capacity.
“People are just concerned about supply,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “There’s a reasonably high and growing concern about how refineries can stay in business with consistently volatile margins.”
Distillate fuel stockpiles, including diesel and heating oil, sank 2.32 million barrels to 130.6 million.
Heating oil for February delivery advanced 0.81 cent, or 0.3 percent, to $3.1173 a gallon, the highest settlement since Oct. 19. Volume was 4.3 percent above the 100-day average for the time of day. Futures have risen 2.4 percent this month.
The more actively traded March contract gained 1.01 cents to $3.1087 a gallon.
The retail price for regular gasoline, averaged nationwide, rose 3 cents to $3.394 a gallon, the highest level since Nov. 30, AAA said today on its website. Prices at the pump have climbed for 13 straight days.