Gasoline slid a third straight day after the Energy Information Administration reported supplies of the motor fuel rose more than expected and demand was at the lowest seasonal level in 10 years. Crack spreads narrowed.
Futures declined as total gasoline inventories jumped 2.75 million barrels to 221.5 million, an eight-week high and a bigger increase than the 500,000-barrel gain projected in a survey by Bloomberg. Gasoline demand is the lowest for this time of the year since 2003 and over four weeks is 0.4 percent below a year ago.
“Gasoline can’t see a sustained rally this year,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “We’re going to see that a combination of weaker demand and lot of supplies will cap gasoline prices this summer unless you see refinery outages.”
Gasoline for July delivery slipped 1.3 cents, or 0.5 percent, to settle at $2.8101 a gallon on the New York Mercantile Exchange. Trading volume was 9.2 percent above the 100-day average at 3:50 p.m.
Futures have settled into a narrower trading range after seeing wider swings earlier in the year. The 30-day historical volatility for the front-month RBOB contract has dropped from 35.7 percent on April 8 to 17.3 percent today.
“Overall for gasoline, supplies have become more ample and the market became a bit more predictable and kept us in a very tight range,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
July gasoline’s crack spread versus West Texas Intermediate narrowed $1.05 to $22.14 a barrel. Gasoline’s premium over Brent slipped $1.08 to $14.53.
Supplies in PADD 1, which includes the New York Harbor delivery point for Nymex futures, rose 2.86 million to 63.8 million, the highest level since February 2012. Inventories on the Gulf Coast, home to 45 percent of U.S. operable refining capacity, fell 1.44 million barrels.
“The stats are very bearish,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “There’s been no sign of a pickup in demand in months.”
Gasoline at the pump, averaged nationwide, gained 0.1 cent to $3.634 a gallon, Heathrow, Florida-based AAA, the nation’s largest motoring organization, said today on its website. Prices are 9.2 cents above a year earlier.
Ultra-low-sulfur diesel rose for the first time in three days as distillate supplies, including heating oil and diesel, fell 1.16 million barrels, counter to an increase of 1.5 million barrels projected in the survey. Demand jumped 8.7 percent in the week ended June 7, and over the past four weeks was 9.2 percent above a year earlier.
“We did see a substantial uptick in distillate demand, and the drawdown was counter to street expectations,” Armstrong said. “Stronger distillate demand reflects the idea the U.S. economy is growing steadily and in need of distillate products.”
Ultra-low-sulfur diesel for July delivery rose 3.77 cents, or 1.3 percent, to settle at $2.8952 a gallon on the New York Mercantile Exchange. Trading volume was 15 percent below the 100-day average at 2:58 p.m.
The July ULSD contract’s crack spread versus WTI widened $1.08 to $25.72 a barrel, the first gain since June 4. The premium over Brent rose $1.05 to $18.11.
ULSD was higher before the 10:30 a.m. report’s release as the International Energy Agency said summer maintenance at North Sea fields could be lengthier and more extensive than usual. Brent crude gained 0.5 percent on ICE Futures Europe exchange.
“The IEA said crude supplies short-term may tighten even though they lowered demand expectations,” Flynn said. “That gave us some support.”