Gasoline sank to the lowest level in almost two years as Brent crude tumbled at a time when U.S. refiners are poised to return from maintenance and increase production.
Gasoline fell 1.6 percent. Brent crude slid 2.7 percent to the lowest since July 4 amid reports Libya was producing more oil. Over the past five years, U.S. refinery rates increased an average of 1.1 percentage points in November and December, Energy Information Administration data show.
“Indications that more Libyan oil may return to the market in the next two weeks is pressuring Brent and taking gasoline and diesel fuel down with it,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The market is also looking ahead over next few weeks as refiners return from maintenance in the U.S. Gulf Coast.”
Gasoline for December delivery fell 4.16 cents to $2.5454 a gallon on the New York Mercantile Exchange, the lowest settlement since Dec. 19, 2011. Trading volume on all contracts was 5.7 percent below the 100-day average at 4:27 p.m.
Libya was producing 350,000 to 400,000 barrels a day, Ibrahim Al Awami, the oil ministry’s head of measurement and inspection, said by phone yesterday, or about 100,000 barrels a day more than earlier this week.
Brent dropped $2.93 to $105.91 a barrel on the ICE Futures Europe exchange as the euro fell 0.7 percent against the dollar amid speculation the European Central Bank would cut interest rates to boost the region’s economy. A stronger dollar can reduce the investment appeal of dollar-denominated commodities.
“There were fears that the ECB might have to ease some more and that’s boosted the dollar and sent the euro lower, which has weighed more on Brent,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Seasonal maintenance in the U.S. is poised to taper over the next few weeks and refineries are restarted units after planned work and unscheduled repairs.
Phillips 66 said yesterday that it completed maintenance at its 146,000-barrel-a-day Borger, Texas, refinery. Delta Air Lines Inc.’s Monroe Energy LLC subsidiary said yesterday that it was operating the fluid catalytic cracker at its 185,000-barrel-a-day Trainer, Pennsylvania, plant after unplanned repairs.
“Products are weaker because some of the unplanned refining outages are now reversing,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Also U.S. margins look solid, so expectations are that refineries will run when they return from turnaround and that will increase product supplies.”
Gasoline production in the week ended Oct. 25 was the highest since Aug. 16, when refiners were trying to meet higher summer demand.
“The fact that refiners are willing to ramp up gasoline production at a time when refinery crude runs are relatively low suggests that they are using some in-process inventory but also that they know their crude oil processing rates are about to climb,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York.
The motor fuel’s crack spread versus West Texas Intermediate crude gained 3 cents to $12.30 a barrel. The fuel’s spread versus Brent rose to a $1 premium from a 19-cent discount yesterday.
U.S. retail pump prices, averaged nationwide, fell 0.4 cent to $3.275 a gallon, the lowest level since Dec. 26, Heathrow, Florida-based AAA said today on its website. Prices are 23.2 cents below a year ago.
Ultra-low-sulfur diesel for December delivery slid 7.17 cents, or 2.4 percent, to $2.8822, the lowest settlement since July 1. Trading volume was 30 percent above the 100-day average.
ULSD’s premium over WTI declined $1.24 to $26.44 a barrel. The spread versus Brent narrowed 8 cents to $15.14.