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Gasoline Futures Fall Most in 14 Months on Rising Production

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Feb. 27 (Bloomberg) -- Gasoline futures declined the most in 14 months after a government report showed rising East Coast inventories as refineries restored production following maintenance.

The discount of March to April contracts widened as the U.S. prepared to switch from winter- to summer-grade fuel. Gasoline supplies on the East Coast grew by 0.4 percent to 59.8 million barrels in the week ended Feb. 22, the highest level since March 16, an Energy Information Administration report today showed. Refinery production rose to 85.1 percent of U.S. capacity from 82.9 percent a week earlier.

“Refinery utilization increased,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Refineries are starting to exit from peak maintenance season and will be producing more gasoline as we go forward.”

March-delivery gasoline dropped 12.51 cents, or 4.2 percent, to settle at $2.8565 a gallon on the New York Mercantile Exchange, the biggest one-day percentage drop since Dec. 14, 2011. Trading was 42 percent above the 100-day average at 4:02 p.m. Prices are down 5.6 percent this month.

The March contract expires tomorrow. The more actively traded April-delivery futures fell 9.25 cents to $3.1063 a gallon. Prices are higher than March futures because the summer blend of fuel represented by the April contract is costlier to produce. The discount of March to April, known as a contango, was 24.98 cents a gallon, widening from 13.69 cents at the end of December.

“There appears to be ample winter-grade around; perhaps people are selling to get rid of inventory as we head toward expiration,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York.

Refinery Shuts

Hess Corp. shut its 70,000-barrel-a-day refinery in Port Reading, New Jersey, yesterday as the company exits the refining business, a spokesman for the New York City-based company said by e-mail today.

The plant, which opened in 1958, will now operate as a terminal. The refinery didn’t process crude. It had a fluid catalytic cracker that converted heavy gasoil into lighter transportation fuels like gasoline and diesel.

Colonial Pipeline Co. “essentially completed” an expansion of Line 3, which carries mixed oil products to Linden, New Jersey, from Greensboro, North Carolina, said Steve Baker, an Alpharetta, Georgia-based spokesman for the company.

Line Capacity

The pipeline has added 60,000 barrels a day to bring its capacity to 885,000. One new pump station remains offline as the company waits to receive a permit to operate it, Baker said. When turned on, it will add a small amount of capacity to the line.

Gasoline at the pump, averaged nationwide, rose 0.4 cent to $3.786 a gallon yesterday, AAA said on its website. It was the highest price since Oct. 14.

Heating oil for March delivery fell 4.38 cents, or 1.4 percent, to $2.9879 a gallon on the Nymex on trading 31 percent above the 100-day average. Prices have slipped 4.5 percent this month. The April contract fell 4.22 cents to $2.9846 a gallon.

To contact the reporter on this story: Dan Murtaugh in Houston at dmurtaugh@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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