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Gasoline Gains as Crude Surges on Manufacturing and Middle East

July 1 (Bloomberg) -- Gasoline and diesel gained on signs that the global manufacturing outlook is improving and as crude strengthened on concern that protests in Egypt will spread, curbing oil shipments.

Futures advanced as the Institute for Supply Management’s factory index rose to 50.9 from May’s 49. Euro-area manufacturing output contracted less than estimated in June and Japanese manufacturers are optimistic for the first time in two years. Egypt’s military issued a 48-hour ultimatum for political leaders to find a solution to the country’s crisis.

“The Egyptian protests have been a supporting factor to the complex today,” said Andrew Lebow, senior vice president at Jefferies Bache LLC in New York. “It’s just adding instability to an already unstable region.”

August-delivery gasoline gained 2.23 cents, or 0.8 percent, to settle at $2.7379 a gallon on the New York Mercantile Exchange on trading volume that was 44 percent below the 100-day average at 3:14 p.m. Prices slipped 0.4 percent last week and 1 percent in June, the third consecutive monthly decline. Gasoline retreated 11 percent in the second quarter.

Gasoline’s crack spread versus WTI narrowed 49 cents to $17 a barrel. The fuel’s premium over Brent gained 10 cents to $11.99.

Hundreds of thousands of President Mohamed Mursi’s opponents took to the streets nationwide yesterday in Egypt, the largest Arab nation, marking the end of the Islamist leader’s first year in office with demands that he quit.

Suez Canal

Almost 18,000 ships transited Egypt’s Suez Canal in 2011 in both directions, of which 20 percent were petroleum tankers, according to the U.S. Energy Information Administration.

A gauge of manufacturing in the 17-nation euro area increased to 48.8 last month from 48.3 in May, London-based Markit Economics said today. The quarterly Tankan index for large manufacturers rose to plus four in June from minus eight in March, the Bank of Japan said in Tokyo today. A positive figure means optimists outnumber pessimists.

“There was some good economic data this morning and the Buzzard oil field is supporting the Brent crude,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Prices were also supported as Brent gained after rates were reduced at the North Sea Buzzard oil field.

Brent for August settlement rose 84 cents to $103 a barrel on the London ICE Futures Exchange, increasing the cost to process oil that is priced off the London benchmark. The Nexen Inc.-operated 200,000-barrel-a-day Buzzard field is said to be running at reduced rates, according to people with knowledge of the matter.

Buzzard Production

“The oil market is seeing some support because Nexen is having issues with Buzzard oil production and there has been some good economic news,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Pump prices, averaged nationwide, fell 0.5 cent to $3.487 a gallon, Heathrow, Florida-based AAA said today on its website. Retail costs have retreated 19 consecutive days, dropping to the lowest level since Jan. 31.

Ultra-low-sulfur diesel, or ULSD, for August delivery rose 1.48 cents, or 0.5 percent, to settle at $2.8736 a gallon on trading volume that was 25 percent below the 100-day average. Prices increased 1.3 percent last week and 3.1 percent in June, the first gain in five months. Diesel dropped 1.2 percent in the first quarter, the third consecutive quarterly loss.

ULSD’s crack spread versus West Texas Intermediate crude slid 81 cents to $22.70 a barrel. The premium over Brent dropped 22 cents to $17.69.

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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