Gasoline Falls After Government Report Shows Inventory Increase

Gasoline fell to the lowest level since May 2 after a government report showed inventories of the motor fuel increased where analysts predicted a decline.

Futures dropped 0.9 percent on data from the Energy Information Administration that supplies of the motor fuel gained 3.02 million barrels in the week ended May 17, the most since April 12. A Bloomberg survey predicted a drop of 300,000 barrels. The American Petroleum Institute reported yesterday that stockpiles gained by 3.03 million.

“Gasoline supplies are more than plentiful,” Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London, said by telephone. “I wouldn’t be surprised if we moved into contango with RBOB.”

Gasoline for June delivery declined 2.64 cents to settle at $2.8194 a gallon on the New York Mercantile Exchange, a third consecutive drop. Trading volume was 25 percent above the 100-day average for the time of day.

The fuel’s crack spread versus WTI widened 7.4 cents to $24.10 a barrel. July gasoline’s premium over July Brent rose 46 cents to $15.75.

Gasoline demand, measured by deliveries to wholesalers, rose 5.4 percent to 8.79 million barrels a day, the highest in six months.

“The demand numbers were surprising,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “We might actually see better demand going into the Memorial Day weekend.”

Holiday Ahead

The U.S. holiday, which falls on May 27 this year, is traditionally the beginning of the peak summer driving season.

Gasoline at the pump, averaged nationwide, rose 0.2 percent to $3.66 a gallon, Heathrow, Florida-based AAA, the nation’s largest motoring organization, said today on its website. Prices have climbed since May 4 to the highest level since March 24 and are 2 cents below a year earlier.

Ultra-low-sulfur diesel for June delivery fell 5.54 cents, or 1.9 percent, to $2.8736 a gallon on the Nymex on trading volume that was 8.6 percent above the 100-day average for the time of day. It was the largest decline since May 1.

Distillate inventories, which include diesel, fell 1.05 million barrels last week to 118.8 million. Analysts had forecast a 1 million-barrel increase.

The fuel’s crack spread versus West Texas Intermediate crude oil narrowed 55 cents to $26.30 a barrel. July ULSD’s premium over Brent fell 68 cents to $18.02 a barrel.

Before it's here, it's on the Bloomberg Terminal.