Gasoline fell on speculation that supplies are rising as refineries restored units to production and lower pump prices indicated regional tightness eased. The crack spreads, returns on producing the motor fuel from West Texas Intermediate and Brent crudes, widened.
Futures dropped 1.7 percent amid production at the highest level this year in the week ended May 17 and stockpiles at the most since April 5, according to Energy Information Administration data. The average pump price in Minnesota is down 28.08 cents since May 20, when the state had the highest costs in the continental U.S., said AAA, the nation’s largest motoring organization.
“We’re seeing continued improvement in supplies,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Gasoline for June delivery declined 4.97 cents to settle at $2.8031 a gallon on the New York Mercantile Exchange, the lowest level since May 2. Trading volume was 0.6 percent below the 100-day average at 3 p.m. Gasoline’s discount versus heating oil widened by 1.26 cents to 6.64 cents, indicating traders valued gasoline less.
Gasoline’s crack spread versus WTI widened 4 cents to $24.45 a barrel. July gasoline’s premium over July Brent rose 27 cents to $15.48 at 2:45 p.m.
The EIA, the statistical arm of the Energy Department, is scheduled to report last week’s inventories tomorrow, a day later than usual because of the May 27 U.S. Memorial Day holiday. The report will probably say that gasoline supplies declined 500,000 barrels, according to the median estimate of 11 analysts in a survey by Bloomberg.
Gasoline demand increased 5.4 percent in the week ended May 17 while consumption averaged over four weeks was down 3.3 percent from the year before, EIA data showed. Memorial Day is the traditional kickoff of the summer driving season.
“No one is willing to prop the price up after the Memorial Day weekend,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “A one-week jump in demand won’t likely be repeated. If refineries keep utilization rates up, it’s not a bullish sign for gas.”
Futures deepened losses as equities fell and crude slipped after the International Monetary Fund cut China’s growth forecast. The Standard & Poor’s 500 Index dropped 0.6 percent at 3 p.m. in New York. Crude oil for July delivery on Nymex declined 2 percent to settle at $93.31.
“Equities turned and oil turned,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “There’s a lot of focus today with the IMF trimming growth rates.”
Gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.621 a gallon, Heathrow, Florida-based AAA said today on its website. Prices have declined for seven consecutive days and are 1.5 cents below a year earlier.
ULSD for June delivery dropped 3.71 cents, or 1.3 percent, to settle at $2.8695 a gallon on trading volume that was 22 percent below the 100-day average.
July ULSD’s crack spread versus WTI crude oil widened 45 cents to $27.41 a barrel. July ULSD’s premium over Brent fell 29 cents to $18.02 a barrel.