Gasoline retreated from a nine-month high after the Energy Information Administration reported a smaller-than-forecast drop in inventories.
Futures fell 0.17 cent, the first decline in four days. Gasoline supplies slipped 274,000 barrels to 210 million last week, less than the 1.65 million reduction projected in a Bloomberg survey. Refineries processed the most crude since Jan. 3, indicating that gasoline output is poised to rise. Plants ran at 91 percent of capacity, up from 83.5 percent a year earlier.
“The refineries are getting ready to open the taps with regards to gasoline production,” said Tim Evans, an energy analyst at Citi Futures in New York. “You have a refinery operating rate that is 7.5 percent higher than it was a year ago.”
May-delivery gasoline settled at $3.0935 a gallon on the New York Mercantile Exchange after dropping as much as 1.1 percent. Volume was 45 percent above the 100-day average at 4:40 p.m. Prices touched $3.1018, the highest intraday level since Aug. 29, before the report’s 10:30 a.m. release in Washington.
Futures have advanced 18 percent since Jan. 31 as supplies fell 11 percent while refiners performed seasonal maintenance.
“We’re too high now,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The market is feeling because the drawdown isn’t as large as anticipated that this is the first sign that supplies will build as we near the gasoline season. Refineries are refining at a faster clip and supplies should start building pretty rapidly.”
Gasoline stockpiles in PADD 1B, which includes New York Harbor, the delivery point for Nymex futures, rose 55,000 barrels to 28.9 million, the first increase in four weeks.
Production of gasoline declined to the lowest since week ended Feb. 21 in the seven days to April 18.
“This tells me that gasoline-making units are offline and what we are likely to see in the weeks ahead is the classic just-in-time surge of gasoline production to get us ready for the summer driving season,” Evans said.
Consumption over the past four weeks was 1.8 percent higher than a year earlier, down from 4.6 percent a week earlier.
“The market is reacting today to the smaller-than-expected gasoline inventory decline,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “From here on in, you may start to see gasoline supplies rising, but so will demand.”
Sen projects that refinery rates will be lower in May than April, with 700,000 barrels a day of offline capacity in May versus 561,000 barrels in the prior month.
“The peak of supply tightness is nearing,” Sen said.
The average U.S. pump price rose 0.6 cent to $3.673 a gallon, the highest in 13 months, according to data from Heathrow, Florida-based AAA. Prices are 15.8 cents higher than a year ago.
Gasoline’s crack spread versus West Texas Intermediate widened 13 cents to $26.26 a barrel. The motor fuel’s premium to Brent crude fell 2 cents to $18.59. The spreads are based on June contracts.
Supplies of distillates, including diesel and heating oil, rose 597,000 barrels last week to 112.5 million. The survey projected a decline of 300,000 barrels.
Distillate demand dropped 8 percent to 3.83 million barrels a day. Consumption over the past four weeks was 5.2 percent above a year earlier.
Ultra low sulfur diesel for May delivery fell 2.17 cents, or 0.7 percent, to settle at $2.9809 a gallon. Volume was 6.7 percent below the 100-day average.
Diesel’s crack spread versus WTI narrowed 52 cents to $23.54 a barrel. The premium to Brent dropped 67 cents to $15.87.