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Heating Oil, Gasoline Gain as Shutdowns May Lower Supplies

Feb. 5 (Bloomberg) -- Heating oil rose to the highest level since October and gasoline advanced on speculation that refinery shutdowns are reducing East Coast stockpiles.

Futures advanced as Korea National Oil Corp.’s 115,000-barrel-a-day Come by Chance refinery in Newfoundland was assessing units after a power loss shut the plant yesterday. Hess Corp. will shut its New Jersey plant later this month and Philadelphia Energy Solutions is performing maintenance. The gasoline crack spread rose to the highest level since October.

“We have had so many refinery outages the past few days and seasonally there is maintenance,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research consulting company in London. “A lot of refineries are older in the U.S. and a lot of refinery maintenance was pushed back to take advantage of good margins.”

Heating oil for March delivery advanced 3.73 cents, or 1.2 percent, to $3.1913 a gallon on the New York Mercantile Exchange, the highest settlement since Oct. 16. Volume was 28 percent above the 100-day average at 3:02 p.m. New York time.

The premium of March futures over April increased 0.24 cent to 2.81 cents a gallon.

Inventories of distillate fuels, including heating oil and diesel, probably fell 625,000 barrels last week, according to the median of 8 analyst forecasts compiled by Bloomberg. Supplies of gasoline probably increased 900,000 barrels, the survey showed.

Power has been restored to the Come by Chance refinery and “equipment is being closely assessed before start-up,” Gloria Slade, a refinery spokeswoman, said in an e-mail today.

Philadelphia Refinery

Philadelphia Energy Solutions 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 idled for repairs since December.

In the past eighteen months, two other refineries serving the New York Harbor market, Hovensa LLC’s St. Croix refinery in the Virgin Islands and Sunoco Inc.’s Marcus Hook refinery in Pennsylvania, closed permanently.

“The Trainer refinery cat cracker has been delayed and the refinery maintenance schedule is heavier this year than last year,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The Northeast is already feeling the effect of refinery shutdowns the last few years.”

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.

Lost Production

Lipow estimated that the Port Reading refinery can produce 50,000 barrels a day of the motor fuel and represents 7.7 percent of PADD 1 gasoline-making capacity. The Come by Chance refinery makes about 30,000 barrels a day of gasoline that’s sold primarily in New England, Lipow said.

Gasoline for March delivery advanced 2.59 cents, or 0.9 percent, to settle at $3.0374 a gallon on the Nymex. Futures rose on volume that was 18 percent below the 100-day average. Gasoline has been the top performer for the past month and for the past two years on the Standard & Poor’s GSCI commodity index.

The March gasoline crack spread versus West Texas Intermediate widened 62 cents to $30.93 a barrel on the exchange at settlement, the largest gap since Oct. 11.

The retail price for regular gasoline, averaged nationwide, rose 1 cent to $3.533 a gallon, the highest level since Oct. 29, AAA said today on its website. Costs have climbed 7.3 percent this year and are 1.6 percent more than a year ago.

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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