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Gasoline Futures Gain on Threat of Storm Disrupting Refineries

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Oct. 3 (Bloomberg) -- Gasoline gained as Tropical Storm Karen may threaten Gulf Coast refineries, disrupting production and distribution of the motor fuel at a time when plants are shutting units for seasonal maintenance.

Futures rose as the National Hurricane Center issued a hurricane watch from Grand Isle, Louisiana, to Indian Pass, Florida. Karen, which formed in the southeast Gulf of Mexico, is expected to be at or near hurricane strength tomorrow. The forecast track predicts landfall as a tropical storm near the Alabama-Florida line early Oct. 6.

“We’ve been down pretty strongly, especially in gasoline,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. It shows how much the market has dropped “if just the threat of flooding for the refineries near Louisiana can push the market higher,” he said.

Gasoline for November delivery rose 1.09 cents, or 0.4 percent, to settle at $2.6396 a gallon on the New York Mercantile Exchange. Trading volume was 7.6 percent below the 100-day average at 3:30 p.m.

The storm is arriving as plants have already begun to reduce production for seasonal maintenance. Refinery utilization fell 1.3 percentage points to 89 percent in the week ended Sept. 27, the lowest level since June 7, the Energy Information Administration reported yesterday. Phillips 66’s 238,000-barrel-a-day Bayway refinery in Linden, New Jersey, has begun planned maintenance, the company said Oct. 1.

Gasoline Inventories

Inventories of the motor fuel rose 3.5 million barrels to 219.7 million in the week ended Sept. 27. Supplies in PADD 1, which includes New York Harbor, the delivery point for the Nymex contract, increased 1.56 million barrels to 56 million.

“We have plenty of gasoline,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Events like Phillips 66 Bayway going into turnaround is what will impact supply.”

Futures touched $2.6712 before paring gains as the Institute for Supply Management’s non-manufacturing index dropped to 54.4 from the prior month’s 58.6, the biggest decrease since November 2008, the Tempe, Arizona-based group said today.

The motor fuel’s crack spread versus West Texas Intermediate crude widened $1.25 to $7.55 a barrel. The fuel’s premium over Brent increased 65 cents to $1.86, after falling yesterday to the lowest level since Oct. 30.

Pump Prices

Pump prices, averaged nationwide, fell 0.9 cent to $3.376 a gallon, the lowest level since Jan. 28 and 40.6 cents below a year ago, Heathrow, Florida-based AAA said today on its website.

In Louisiana, a tropical storm watch is in effect from Grand Isle to Morgan City, including New Orleans. The system, which has top sustained winds of 65 miles (105 kilometers) per hour, is 430 miles south of the mouth of the Mississippi River and moving north-northwest at 12 mph.

Ultra-low-sulfur diesel for November delivery rose 1.06 cents, or 0.4 percent, to $3.0033 a gallon on trading volume that was 21 percent above the 100-day average.

ULSD’s crack spread versus WTI widened $1.24 to $22.83 a barrel while the premium over Brent increased 64 cents to $17.14.

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

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net