Gasoline fell along with crude as a U.S. accord with Russia reduced the threat of an American military strike against Syria.
Futures slid as the Sept. 14 agreement to pursue the destruction of Syria’s chemical weapons eased concern that Middle East regional tensions would be ignited and crude supply disrupted. Gasoline fell more than crude or ultra-low sulfur diesel and its premium to later months narrowed.
“The biggest contributor to today’s decline is that Russia and the U.S. have agreed on a plan to put Syria’s chemical weapons under international control,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The market doesn’t see the U.S. conducting a missile attack on Syria for an extended period of time.”
Gasoline for October delivery fell 5.3 cents, or 1.9 percent, to $2.7166 a gallon on the New York Mercantile Exchange on trading volume that was 16 percent below the 100-day average at 3:12 p.m. The October contract’s premium to November narrowed 0.26 cent to 1.01 cents.
The accord, negotiated by U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov, sets a framework for finding, securing and destroying Syrian President Bashar al-Assad’s stocks of poison gas. The U.S. discussed a military strike on Syria in response to an Aug. 21 chemical weapons attack outside Damascus.
“This is mostly about Syria today,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “The market beginning last week was in the process of removing the risk premium that had been attached to Syria.”
Demand for the motor fuel may decline because the driving season has ended and refiners may have built up supplies when margins were higher for the winter-blend grade at the first of the month. The October contract is based on winter-grade gasoline, which uses cheaper blending components.
Stockpiles of the motor fuel in PADD 3, which includes the Gulf Coast, home to 45 percent of U.S. refining capacity, rose to the highest seasonal level in weekly data going back to 1990 in the week ended Sept. 6, according to Energy Information Administration data. Consumption slid 5.4 percent to 8.61 million barrels a day, the lowest level since May 10.
October gasoline’s discount to October ULSD widened 0.3 cent to 34.71 cents.
“People may be getting in heat-to-gas spreads now,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
The motor fuel’s crack spread versus West Texas Intermediate crude narrowed 67 cents to $7.51 a barrel, after finishing August at $13.73. The fuel’s premium over Brent, which was $7.37 on Aug. 30, slid 49 cents to $3.60.
“Winter-blend margins were super-big really early so people made a lot of winter grade,” Sen said.
The EIA may report on Sept. 18 that gasoline inventories rose 500,000 barrels, according to the median estimate of nine analysts in a survey by Bloomberg.
Pump prices, averaged nationwide, fell 0.6 cent to $3.517 a gallon, 34.7 cents below a year ago, Heathrow, Florida-based AAA said today on its website.
Ultra-low-sulfur diesel for October delivery fell 5 cents, or 1.6 percent, to $3.0637 a gallon, the lowest settlement since Aug. 14. Trading volume was 11 percent above the 100-day average.
ULSD’s crack spread versus WTI narrowed 48 cents to $22.09 a barrel. The premium over Brent fell 41 cents to $18.58.