Gasoline Drops to 7-Week Low as Brent Slips Amid Growth Concern

Gasoline sank to a seven-week low as Brent crude weakened and amid concern economic expansion in the U.S. and China may slow. Crack spreads narrowed.

Futures slipped as Brent crude dropped below $100 and its premium to the U.S. benchmark oil shrank, making processing oil priced off Brent less expensive. Goldman Sachs Group cut China’s growth forecast. U.S. Federal Reserve Chairman Ben S. Bernanke indicated last week the central bank may begin tapering its bond buying this year and end it in 2014.

“Brent has finally given it up,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Then there’s the situation in China and Goldman Sachs lowering their growth estimates. What could turn the market around is if the Feds eases concerns about tapering.”

July-delivery gasoline fell 3.28 cents, or 1.2 percent, to $2.7289 a gallon at 12:38 p.m. on the New York Mercantile Exchange, after sliding 4.7 percent last week. Volume was 16 percent above the 100-day average for the time of day.

Gasoline’s crack spread versus West Texas Intermediate narrowed $1.55 to $20.12 a barrel, the lowest level in five months. The fuel’s premium over Brent fell 66 cents to $13.79.

Brent weakened as a stronger dollar reduced the investment appeal of commodities and on concern that oil demand will fall if China’s growth continues to slow. The U.S. currency was 0.2 percent higher against the euro at 12:43 p.m. in New York.

WTI-Brent

The London benchmark fell versus WTI on speculation the shutdown of three Canadian pipelines by Enbridge Inc. after flooding will raise demand for U.S. crudes, particularly from Midwestern refineries who may turn to Cushing, Oklahoma, the storage hub and delivery point for the WTI futures contract.

The August WTI contract’s premium over September futures increased 8 cents to 14 cents a barrel. Brent oil for August delivery fell 53 cents to $100.38 a barrel and touched $99.67. Brent’s premium to WTI narrowed 88 cents to $6.34.

“The market clearly thinks it’s going to impact structure and it may have a supply impact,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Look at the spreads. You can see the front is gaining on the back for WTI and you see the Brent-WTI spread narrowing.”

Gasoline at the pump, averaged nationwide, slipped 0.6 cent to $3.567 a gallon, Heathrow, Florida-based AAA said today on its website. Prices have retreated 12 straight days and are the lowest since May 9.

Shell Pernis

Ultra-low sulfur diesel’s loss was smaller than gasoline’s as the front-month contract for gasoil in Europe was valued higher than later months for a fourth straight day. Royal Dutch Shell Plc halted maintenance activities at its 404,000-barrrel-a-day Pernis refinery in the Netherlands after an odor was detected.

“Gasoil spreads are very strong and Shell just extended maintenance at its Pernis refinery,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

Ultra-low-sulfur diesel for July delivery fell 0.35 cent to $2.8406 a gallon on trading volume that was 18 percent above the 100-day average. Prices fell 4 percent last week.

ULSD’s crack spread versus WTI narrowed 54 cents to $25.19 a barrel. The premium over Brent was 26 cents higher at $18.77.

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