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Gasoline Futures Retreat on Speculation Price-Gain Overextended

Jan. 31 (Bloomberg) -- Gasoline retreated, capping the biggest monthly gain since September, on speculation that prices rose too fast in the longest rally since July 2009.

Futures fell for the first time in 11 days after climbing 7.6 percent this month on indications the U.S. economy was strengthening and as refineries shut units for maintenance and unplanned work. Gasoline was the second-best performer on the Standard & Poor’s GSCI commodity index in January, after cotton.

“The 10-day rally factored in the offline production we’re expecting to see in the coming months and now it might be overextended,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Gasoline for February delivery fell 1.29 cents, or 0.4 percent, to $3.0258 a gallon on the New York Mercantile Exchange. Volume was 18 percent above the 100-day average at 2:50 p.m.

February gasoline and heating oil contracts expired at the end of floor trading. March-delivery futures slipped 0.15 cent to $3.0317. The gasoline crack spread, based on March gasoline and WTI contracts, rose 39 cents to $29.84 a barrel, the highest level since October.

Futures pared losses as Brent crude gained against West Texas Intermediate oil after Enterprise Products Partners LP indicated that the terminus in Texas of its Seaway pipeline that relieves a bottleneck of crude at Cushing, Oklahoma, will have limited capacity until late 2013 when a lateral pipeline is completed.

Brent Link

A stronger Brent increases the price of products refined with oil priced off the London benchmark. The WTI-Brent spread widened $1.10 to $18.06 a barrel.

“It’s a spread trade at the moment,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. “The new trigger is Enterprise saying it’s building a pipeline where Seaway ends and connecting to the Gulf Coast, which would help clear bottlenecks” but can be taken as an indication that Seaway won’t operate at full capacity until then, she said.

Gasoline reached a four-month high yesterday on speculation refinery repairs will reduce East Coast stockpiles that are the lowest seasonally since 2004, according to Energy Information Administration data.

“Cooler heads are prevailing today,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Heating oil for February delivery rose 1.25 cents, or 0.4 percent, to $3.1298 a gallon, the highest level since Oct. 19. Volume was 3.2 percent below the 100-day average for the time of day. Futures gained 2.8 percent this month, the largest increase since August.

The more actively traded March contract advanced 1 cent $3.1187 a gallon.

The retail price for regular gasoline, averaged nationwide, rose 2.9 cents to $3.423 a gallon, the highest level since Nov. 25, AAA said today on its website. Prices at the pump have climbed for 14 straight days.

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

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