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Gasoline Falls Most in Three Months; Crack Spreads Narrow

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Feb. 26 (Bloomberg) -- Gasoline and heating oil in New York tumbled the most since November as Brent crude and gasoil in Europe declined. Crack spreads narrowed.

March gasoline fell 2.6 percent. The April crack spread, or premium of the motor fuel over West Texas Intermediate crude on Nymex, declined $2.24 to $41.72 a barrel. The spread versus Brent crude on the ICE Futures Europe exchange in London shrank 99 cents to $21.64 a barrel. Brent slipped as Italy’s borrowing costs rose to a three-month high on concern political stalemate will worsen the country’s debt crisis.

“People are realizing the spike we saw in gasoline may be unjustified,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “We’re seeing the European fear play come back into the market.”

Gasoline for March delivery fell 7.95 cents to settle at $2.9816 a gallon on the New York Mercantile Exchange, a four-week low. Prices have dropped five of the past six days after reaching a four-month high on Feb. 15.

The discount for the March contract, which expires Feb. 28 and is for winter-grade fuel, widened by 1.47 cents to 21.72 cents a gallon below April futures. The April contract represents summer-grade gasoline, which is more expensive to refine. April’s premium over September futures shrank 1.12 cents to 27.1 cents a gallon.

Brent, Gasoil

Brent crude dropped 1.5 percent and gasoil tumbled 2.2 percent on ICE.

Gasoline has gained 6 percent this year and is the second-best performer after cotton on the Standard & Poor’s GSCI index of 24 commodities. Prices have risen on concern refinery shutdowns will tighten supply as demand picks up in April.

Money managers increased bullish bets on U.S. gasoline prices for a fifth week in the period ended Feb. 19, boosting them 0.5 percent to 90,542 contracts of futures and options, according to Commodity Futures Trading Commission data.

“Gasoline was overdone and overbought,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Retail gasoline, averaged nationwide, rose 0.5 cent to $3.782 a gallon, the highest level since Oct. 14, AAA said today on its website. The fuel has jumped 15 percent this year to within 15.4 cents of last year’s high of $3.936, according to AAA data.

Heating oil for March delivery fell 6.72 cents, or 2.2 percent, to settle at $3.0317 a gallon on the exchange, the lowest level since Jan. 17.

The April heating oil crack spread versus WTI sank $2.51 to $34.50 a barrel. The spread to Brent shrank $1.26 to $14.42.

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