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Gasoline Climbs to Three-Month High as U.S. Inventories Decline

Gasoline rose above $3 a gallon for the first time since April after a report that inventories dropped the most in 11 weeks and demand reached the highest level since August.

Futures jumped to a three-month high. The Energy Information Administration reported that gasoline supplies fell 2.63 million barrels to 221 million, the fewest since May 31 and the biggest drop since April 19. Demand increased for a fourth straight week to 9.3 million barrels a day, the highest since Aug. 10.

“Gasoline is looking better,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “I’m very surprised at the demand. It’s likely more exports to Latin America or to PADD 1 and even to Canada.”

August-delivery gasoline rose 8.89 cents, or 3 percent, to settle at $3.0149 a gallon on the New York Mercantile Exchange on trading volume that was 52 percent above the 100-day average at 3:38 p.m.

Futures widened gains after IIR Energy reported Irving Oil Corp. shut a 25,000-barrel-a-day fluid catalytic cracker last weekend at the Saint John refinery in New Brunswick for unplanned repairs and the work may keep the unit closed for several months. The plant ships gasoline and diesel to the U.S. Northeast.

The inventory decline came even as refiners processed the most crude and other feedstocks since August 2005. Gasoline output jumped 2.2 percent to 9.59 million barrels a day, the highest level since August 2010.

Refinery Runs

“The gasoline draw came despite the fact refinery runs picked up so sharply,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Latin demand has been robust and Nigeria as well.”

The EIA estimated gasoline exports were unchanged at 319,000 barrels a day last week.

Gasoline’s crack spread versus WTI widened 74 cents to $20.11 a barrel, the largest difference since June 21. The fuel’s premium over Brent jumped $3.03 to $18.12, the biggest gap since April 1.

Pump prices, averaged nationwide, rose 1.8 cents to $3.501 a gallon, Heathrow, Florida-based AAA said today on its website. That’s the highest price since June 28 and biggest one-day increase since May 17.

“It’s clear the recent price increases for crude oil are beginning to reach consumers at the pump,” Michael Green, a spokesman for AAA in Washington, said in a e-mail today.

Distillate Production

Distillate output jumped 4 percent to 5.04 million barrels a day, the most in weekly data going back to 1982. Inventories rose 3.04 million barrels to 123.8 million, the highest level since Feb. 22. Distillate demand fell 14 percent to 3.84 million barrels a day, the least since May 31. The EIA estimated distillate exports at 840,000 barrels a day.

“Distillate export demand is strong and will probably go back up over a million a day,” Lebow said.

Valero Energy Corp. is starting a new 57,000-barrel-a-day hydrocracker at its St. Charles refinery in Louisiana to increase distillate capacity. Last year, the San Antonio-based company debuted a 60,000-barrel-a-day hydrocracker at its Port Arthur, Texas, refinery.

“Both are large distillate producers,” said Bill Day, a company spokesman in San Antonio. “We’d like to expand both to 72,000 barrels.”

Ultra-low-sulfur diesel, or ULSD, for August delivery rose 1.6 cents, or 0.5 percent, to settle at $3.0017 a gallon on trading volume that was 1.8 percent above the 100-day average. It was the first time ULSD settled at a discount to gasoline since April 1.

ULSD’s crack spread versus West Texas Intermediate crude fell $2.32 to $19.55 a barrel. The premium over Brent fell 3 cents to $17.56.

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