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Gasoline Slides as Jobs Report Ignites Concern Demand Will Fall

Aug. 2 (Bloomberg) -- Gasoline slid to a three-week low after U.S. payrolls rose less than expected in July, indicating the labor market is struggling and fuel-demand growth may slow.

Futures fell 1.1 percent. The Labor Department reported that payrolls rose by 162,000 and revised June’s estimate of job gains to 188,000 from 195,000. Workers spent fewer hours at their jobs and hourly wages slipped for the first time since October. The labor force as a share of the population fell to 63.4 percent from 63.5 percent.

“The market was disappointed in the amount of jobs that were created and the fact that the labor market pool-participation rate fell as well as earnings,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “This could mean the consumer will have less money to spend.”

Gasoline for September delivery declined 3.37 cents to $2.9947 a gallon on the New York Mercantile Exchange, the first settlement below $3.00 since July 9. Trading volume was 27 percent below the 100-day average at 3:12 p.m. Prices sank 1.6 percent this week.

July job gains were the smallest in four months. The median forecast of 93 economists surveyed by Bloomberg called for a 185,000 increase. Average hourly earnings fell 0.1 percent to $23.98 from the prior month. The average work week slipped to 34.4 hours from 34.5 hours.

“It comes down to jobs and income and neither one is good,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.

Today’s loss follows two days of gains for the September contract amid signs the U.S. economy was strengthening and as the Federal Reserve maintained its bond-buying pace.

GDP Accelerates

U.S. gross domestic product, the value of all goods and services produced, rose at a 1.7 percent annualized rate in the second quarter, after a 1.1 percent gain the prior quarter, Commerce Department figures show. Consumer spending, the biggest part of the economy, climbed 1.8 percent in June. U.S. jobless claims fell last week to a five-year low, the Labor Department said yesterday.

“Everyone was waiting for the jobs number this week and it just seems that the market was overshadowed by the number,” said Joe Posillico, senior vice president of energy derivatives at Jefferies Bache LLC in New York.

Gasoline’s crack spread versus West Texas Intermediate crude narrowed a third straight day, falling 46 cents to $18.84 a barrel, the lowest since July 8. Gasoline’s premium over Brent narrowed 82 cents to $16.83.

Pump Prices

Pump prices, averaged nationwide, slipped 0.4 cent to $3.626 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are 9.2 cents higher than a year ago.

Ultra-low-sulfur diesel for September delivery declined 2.52 cents, or 0.8 percent, to settle at $3.0714 a gallon on trading volume that was 29 percent below the 100-day average. Prices gained 2 percent this week.

ULSD’s crack spread versus West Texas Intermediate crude slipped $11 cents to $22.06 a barrel. The premium over Brent fell 47 cents to $20.05.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net

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