Gasoline Rises to Three-Month High on East Coast Supply Concern

Gasoline rose to a three-month high as the U.S. government increased its demand outlook and on concern that one of the largest refineries along the North American Atlantic Coast will slow output. Crack spreads widened.

Futures gained 1.5 percent. The U.S. Energy Information Administration boosted its outlook for 2013 gasoline use to 8.67 million barrels a day. A train carrying crude to Irving Oil Corp.’s 298,800-barrel-a-day Saint John refinery in New Brunswick derailed and exploded in the Quebec town of Lac-Megantic early July 6, killing at least 13 people.

“Gasoline has been supported by concern that Irving might have to cut back its crude runs as a result of losing some crude supply,” said Andy Lipow, president of Houston-based Lipow Oil Associates LLC. “It’s not like that rail line is back in service.”

August-delivery gasoline rose 4.23 cents to $2.926 a gallon on the New York Mercantile Exchange, the highest settlement since April 9. Trading volume was 11 percent below the 100-day average at 2:53 p.m.

Gasoline’s crack spread versus WTI widened $1.39 to $19.36 a barrel. The fuel’s premium over Brent gained $1.40 to $15.08.

The Saint John refinery sends more than half its refined products to the U.S. Northeast, according to the company’s website.

Rail Traffic

It was unloading 80,000 to 90,000 barrels a day of crude from rail cars last month and planned to increase volumes, Gary Weimer, quality assurance manager of Mid-Continent crude for the company, said during an oil quality conference in Seattle, Washington, June 6.

“They’re ramping up to more,” Weimer said at the meeting hosted by the Crude Oil Quality Association. “I know where they want to go to, and that’s not the end-point for us. We have more rail cars coming online.”

Irving has been bringing oil into the Saint John refinery by rail for about a year and half, offloading oil from the Bakken oil-shale formation and mixed-sweet crudes from western Canada, according to Weimer.

The EIA’s demand forecast in its Short-Term Energy Outlook was up from 8.66 million barrels a day in last month’s estimate, which was the lowest level since 2001.

Higher Demand

Implied demand for the fuel increased 300,000 barrels to 9.29 million barrels a day the week ended June 28, according to EIA data.

“The more the economy keeps moving forward, the more we’re going to see demand start to rise,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.

Pump prices, averaged nationwide, rose 0.9 cent to $3.483 a gallon, Heathrow, Florida-based AAA said today on its website. It’s the first increase since June 11.

Ultra-low-sulfur diesel, or ULSD, for August delivery gained 0.56 cent to $2.9857 a gallon on volume that was 27 percent below the 100-day average.

ULSD’s crack spread versus West Texas Intermediate crude narrowed 15 cents to $21.87 a barrel. Its premium to Brent narrowed 14 cents to $17.59.

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