Gasoline Slides on Weaker Brent, Europe Debt Crisis ConcernBarbara Powell
Gasoline declined as Brent crude weakened versus West Texas Intermediate and the dollar strengthened amid concern that Europe’s debt crisis may worsen after a levy on Cyprus bank savings.
Futures tumbled 1.1 percent as the euro lost the most since December 2011 against the dollar after the euro area may force depositors in Cyprus to share in the cost of the country’s bailout. A stronger dollar reduces the investment appeal of commodities. Brent’s premium to WTI slipped below $16 for the first time in two months.
“I’m pegging this decline all toward the dollar because this Cyprus issue seems to have pushed the dollar up and the euro down,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Gasoline for April delivery fell 3.49 cents to $3.1289 a gallon on the New York Mercantile Exchange, the lowest settlement since March 7. Trading volume was 34 percent below the 100-day average for the time of day. The contract is for reformulated gasoline to be blended with ethanol, or RBOB.
The April contract’s premium to September narrowed 1.11 cents to 19.64 cents a gallon. The April crack spread versus WTI narrowed $1.76 to $37.67 a barrel. The May spread against Brent oil on ICE Futures Europe Exchange fell $1.06 to $21.43.
The premium of Brent, the pricing basis for gasoline imports, over WTI narrowed 60 cents to $15.40 a barrel, the smallest gap since Jan. 17.
“Brent is under more pressure and that is keeping gasoline under pressure,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.
Cypriot President Nicos Anastasiades bowed to demands by regional finance ministers to raise 5.8 billion euros ($7.48 billion) by imposing losses on depositors in the island’s banks.
“There’s concern that the crisis in Cypress would have a ripple effect throughout other countries in Europe and we’re seeing a selloff in equities and commodities,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Prices touched a low of $3.0997 before paring losses as the euro bounced off earlier lows on speculation initial reaction to the Cyprus bank levy was overdone.
“The knee-jerk reaction was to presume the worst-case scenario,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “The markets are coming to the realization that contagion is unlikely, given the ring-fencing measures the governments have taken. That said, any bounce is premature as sentiment is extremely fragile.”
Heating oil for April delivery fell 1.23 cents, or 0.4 percent, to $2.9267 a gallon on volume that was 14 percent below the 100-day average for the time of day.
Gasoline at the pump, averaged nationwide, fell 0.1 cent to $3.685 a gallon, AAA said today on its website. Prices are 15.3 cents below a year ago and have dropped 10.1 cents from the year-to-date high of $3.786 on Feb. 26.