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Gasoline Tumbles on Speculation Refinery Glitches Short-Lived

March 11 (Bloomberg) -- Gasoline fell on speculation that that U.S. production is sufficient to weather a series of short-term refinery glitches.

Gasoline sank 1.6 percent, declining the most of any commodity in the Standard & Poor’s GSCI index, as plants from the Gulf Coast to the Midwest reported flaring, malfunctions and power outages during the past three days. The gasoline crack spread, the profit from producing the fuel as represented by its premium over crude, shrank.

“A rash of refinery problems seem to spark the market but the concern has gone away,” said Phil Flynn, a senior market analyst at Price Futures Group in Chicago. “We’re back in the shoulder season and we have plenty of supply.”

April-delivery gasoline fell 5.11 cents to $3.1524 a gallon on the New York Mercantile Exchange on volume that was 81 percent above the 100-day average for the time of day.

The April crack spread versus West Texas Intermediate crude on Nymex narrowed $2.26 to $40.34 a barrel. The spread against Brent oil on ICE Futures Europe Exchange slipped $1.52 to $22.18.

Futures rose 14 percent this year to March 8 on concern that unplanned refinery outages, coupled with heavier-than-normal seasonal maintenance and the closing of Hess Corp.’s New Jersey plant, would crimp supplies on the East Coast. The gasoline crack spread over WTI reached an all-time high of $44.03 on Feb.22.

The premium of April over the May contract shrank 1.05 cents to 0.95 cent a gallon, and by 4.44 cents to 20.81 cents over September futures, indicating less supply concern.

Phillips Sweeny

Phillips 66 said its Sweeny refinery in Texas shut after a power loss yesterday and would be restarting units over the next several days. BP Plc’s Toledo, Ohio, plant is operating normally after a unit malfunction yesterday, according to a person familiar with refinery operations.

Planned turnarounds between January and March took 1.13 million barrels a day of crude processing capacity offline, a 45 percent increase from the five-year average of 780,000 barrels, according to IIR Energy, a Sugar Land, Texas-based energy-information provider. From April to June, that figure will drop to 676,000 barrels, 35 percent above the five-year average.

“After gasoline cruised to a new five-month high, people realized the market was overextended,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “People already had factored in the refinery maintenance they knew about and it doesn’t look like there’s too much more hampering production.”

East Coast

The Energy Information Administration reported on March 6 that gasoline supplies in PADD 1, or the East Coast, expanded 651,000 barrels to 60.5 million as of March 1, the highest level in almost a year. East Coast inventories of reformulated gasoline, or RBOB, rose 1.43 million barrels to 20.3 million, the most since March 2011.

Futures touched $3.2672 earlier, the highest intraday level since Sept. 28, and settled at a five-month high on March 8 on concern that higher prices for Renewable Identification Numbers, or RINs, that refiners must buy in lieu of blending ethanol into gasoline, may limit supplies in some areas.

The cost for RINs in 2013 surged to $1.06 a gallon on March 8, from 56 cents 7.3 cents on Jan. 8.

“The market is concerned some refiners and importers won’t be able to meet renewable fuel standard in 2013 because the RINs simply won’t be available and as a result could cause sporadic shortages in certain areas,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Heating oil for April delivery declined 0.58 cent to $2.9691 a gallon on volume that was 13 percent below the 100-day average for the time of day.

Gasoline at the pump, averaged nationwide, fell 0.2 cent to $3.696 a gallon, AAA said today on its website. Prices have fallen every day since Feb. 26.

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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