Gasoline Weakens as Crude Retreats on Iran Diplomacy, Euro Drop

Gasoline slipped after crude retreated when U.S. Secretary of State John Kerry indicated a diplomatic solution on Iran’s use of nuclear power was possible and as the euro declined.

March futures settled 0.6 percent lower after rising 2.1 percent. The April crack spread, or premium of gasoline over West Texas Intermediate crude on Nymex, declined 7 cents to $43.96 a barrel after touching a record $45.19. The spread versus Brent crude on the ICE Futures Europe exchange in London shrank 43 cents to $22.63 a barrel.

“We’re 7 cents from the highs and it’s all crude-related, based on some dovish comments from Secretary of State Kerry that a solution with Iran is possible,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “There’s a hard correlation to the euro.”

March-delivery gasoline fell 1.85 cents to settle at $3.0611 a gallon on the New York Mercantile Exchange. Crude oil for April delivery on the Nymex dropped 2 cents to $93.11 a barrel, after touching $94.46.

Prices extended their decline after the settlement, sinking 1.4 percent to $3.0355 a gallon. The euro lost 0.9 percent against the dollar at 4:29 p.m. in New York, making commodities priced in the U.S. currency less attractive to investors.

The March gasoline contract, which expires Feb. 28 and is for winter-grade fuel, widened its discount to April futures by 1.63 cents to 20.25 cents. The April contract represents summer-grade gasoline, which is more expensive to refine.

Top Performer

Gasoline has gained 8.9 percent this year and is the top performer this year on the Standard & Poor’s GSCI index of 24 commodities. Prices have risen on concern refinery shutdowns will tighten supply as demand picks up in April.

“The main driver is worries about all the offline refinery production as we get near the usual seasonal step-up in demand,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Seasonal plant maintenance typically peaks in March and April. Refineries used 82.9 percent of capacity in the week ended Feb. 5, the lowest level in 11 months, according to data from the Energy Information Administration.

Gasoline imports slipped to a four-week low. Hess Corp. is scheduled to permanently close its Port Reading, New Jersey, plant this week, increasing the East Coast’s reliance on imports. The refinery represents 7.7 percent of East Coast gasoline-making capacity, estimated Andy Lipow, president of Lipow Oil Associates LLC in Houston.

“The big question for the Northeast will be if they can get enough summer-grade gasoline from Europe and other import locations,” Lipow said.

Retail gasoline, averaged nationwide, was unchanged at $3.777 a gallon, AAA said today on its website. The fuel has jumped 15 percent this year to within 15.9 cents of last year’s high of $3.936, according to AAA data.

Heating oil for March delivery fell 0.53 cent to $3.0989 a gallon on the exchange.

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