Gasoline Futures Climb to Four-Month High as Contango Narrows
Gasoline reached the highest level in more than four months, rising a fifth consecutive week, and the March contract’s discount to April futures narrowed for a second day.
Futures for March delivery climbed 0.6 percent to the highest settlement since Sept. 28. The spread to April shrank 2.05 cents to 17.93 cents, the smallest in eight days, indicating traders consider March winter-grade fuel undervalued. April represents summer-grade fuel, more costly to refine and blend.
“The March-April spread had gone down to 24 cents, 25 cents under after being around 15 cents the last couple of years,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Clearly, it was undervalued. The summer-winter grade was way too wide.”
March gasoline advanced 1.79 cents, or 0.6 percent, to settle at $3.1345 a gallon on the New York Mercantile Exchange on volume that was 58 percent above the 100-day average. Prices rose 2.5 percent this week, the fifth consecutive weekly gain.
Prices rallied after the 2:30 p.m. close of floor trading, touching $3.1567 at 3:26 p.m. after reports that Royal Dutch Shell Plc’s Deer Park, Texas, refinery will shut units beginning March 4 for planned work and Phillips 66 pulled feed from a fluid catalytic cracker at its Sweeny plant yesterday after an electrical disruption.
The motor fuel has been the top performer this year on the Standard & Poor’s GSCI index of 24 commodities with an 11 percent gain.
“We’ve got anticipation of tight supply,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas- based energy consultant. “Prices could go higher.”
Heating oil for March delivery fell 1.33 cents, or 0.4 percent, to settle at $3.2104 a gallon. It was the lowest settlement in six days. Prices sank 0.9 percent this week, the first decline in five weeks.
Crude for March delivery on the Nymex slid $1.45 to $95.86 on the Nymex. Heating oil followed crude lower as output at U.S. factories, mines and utilities fell 0.1 percent after a 0.4 percent gain in December, figures from the Federal Reserve showed today in Washington. The median estimate in a Bloomberg survey called for a 0.2 percent rise.
“The indicator is that demand won’t grow as much as anticipated,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
The retail price for regular gasoline, averaged nationwide, rose 1.5 cents to $3.643 a gallon, the highest level since Oct. 22, AAA said today on its website.
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