Gasoline futures slid to a 16-month low on speculation that supplies will climb as refineries complete fall repairs at a time when demand for the fuel is seasonally low.
Futures sank 2.5 percent. The Energy Information Administration reported that demand over the past four weeks was 8.81 million barrels a day, down from 9.2 million during the period ended Aug. 16. Supplies were 8.5 percent above a year earlier. Refineries operated at the lowest rates since April with units shut for work. In the past five years, runs have climbed an average 303,000 barrels a day in the fourth quarter as seasonal work ended.
“Once refineries come back from maintenance they will make more products,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Demand is weak seasonally and inventories are more than comfortable.”
Gasoline for November delivery slid 6.44 cents to $2.5523 a gallon on the New York Mercantile Exchange, the lowest settlement since June 21, 2012. Trading volume was 5.1 percent above the 100-day average at 3:52 p.m.
Inventories declined 1.81 million barrels to 215.5 million in the week ended Oct. 18, more than the 1 million-barrel drop projected by analysts surveyed by Bloomberg. Along the East Coast, which includes the New York Harbor delivery point for Nymex gasoline and diesel futures, supplies increased 98,000 barrels to 57.2 million, 10 percent above the five-year average.
“Inventories have come off on turnarounds but they’re still pretty high and going into the winter they’re expected to build,” said Joe Posillico, senior vice president of energy derivatives at Jefferies Bache LLC in New York.
The motor fuel’s crack spread versus WTI narrowed $1.24 to $9.95 a barrel. The spread versus Brent fell 51 cents to a 99-cent discount, the lowest level since December 2011.
Pump prices, averaged nationwide, fell 0.5 cent to $3.339 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are 30.9 cents below a year ago.
Ultra-low-sulfur diesel tumbled as supplies of distillates, including diesel and heating oil, rose 1.54 million barrels to 125.8 million. The survey projected a decline of 1.8 million barrels.
“Distillate inventories built last week,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “If we build with all these refineries in maintenance, imagine what will happen when these refineries return to service.”
Ultra-low-sulfur diesel for November delivery fell 7.4 cents, or 2.5 percent, to $2.9233 a gallon. Trading volume was 48 percent over the 100-day average.
Inventories are 6.6 percent higher than a year earlier, according to EIA data. Distillate demand over the past four weeks was 3.9 percent below a year earlier.
Diesel was down before the report’s 10:30 a.m. release in Washington on speculation that the U.S. economy is struggling and fuel demand may decline in the fourth quarter as the impact of the recent government shutdown is felt.
Employers added fewer workers than projected in September, indicating a lack of economic momentum ahead of the 16-day federal government shutdown that ended Oct. 17. The 148,000 increase in October payrolls followed a revised 193,000 gain in August, Labor Department figures showed yesterday.
The shutdown will reduce fourth-quarter growth by 0.3 percent and the budget deal that ended it will prolong economic uncertainty, Ward McCarthy, Jefferies LLC chief economist in New York, said in a research note on Oct. 21.
“Products and the distillate side of the barrel in particular are attuned to the perceptions that we’ll see a slowdown in growth in the domestic economy in the fourth quarter because of the shutdown,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
ULSD’s premium versus WTI narrowed $1.63 to $25.87 a barrel, after touching $28.72 before the inventory report. The crack spread over Brent sank 90 cents to $14.93.