Gasoline Sinks to 9-Month Low on Optimism Storm Won’t Cut Supply

Gasoline sank to a nine-month low on speculation Tropical Storm Karen won’t reduce production from Gulf Coast refineries at a time when inventories are ample.

Futures slipped 1.2 percent. Forecasters no longer expect Tropical Storm Karen to become a hurricane before it makes final landfall on the Gulf Coast near Mobile, Alabama, which is east of almost all the region’s plants. Nationwide gasoline inventories as of Sept. 27 were 7.4 percent above the five-year seasonal average, Energy Information Administration data show.

“It doesn’t seem that this storm is really going to affect refinery operations to any significant degree,” Andy Lipow, president of Lipow Oil Associates LP in Houston, said by phone. “Given that inventories are 12 percent higher than this time last year, the market is not really worried about supply.”

Gasoline for November delivery fell 3.2 cents to $2.6076 a gallon on the New York Mercantile Exchange, the lowest settlement since Dec. 13. Trading volume was 2.8 percent below the 100-day average at 2:44 p.m.

The motor fuel’s crack spread versus West Texas Intermediate crude, a rough indication of refining profit, tumbled $1.87 to $5.68 a barrel, the smallest gap since Nov. 9, 2010. The fuel’s premium over Brent sank $1.80 to 6 cents, the lowest level since December 15, 2011.

The system, which has top sustained winds of 50 miles (80 kilometers) per hour, is 275 miles south-southeast of the Morgan City, Louisiana,and moving north-northwest at 9 mph. The National Hurricane Center tracking map predicts Karen will cross southeastern Louisiana near Buras late Oct. 5 or early Oct. 6 with final landfall near Mobile, Alabama on Oct. 6.

Tankers Delayed

The Louisiana Offshore Oil Port, the only Gulf Coast location able to receive supertankers, stopped unloading ships as the storm approached, the company said in a notice. Motiva Enterprises LLC’s Norco, Louisiana, and Royal Dutch Shell Plc’s Mobile plants have begun reducing operating rates because of delays in crude deliveries, according to a notice on Shell’s website.

Inventories of the motor fuel rose 3.5 million barrels to 219.7 million in the week ended Sept. 27. Supplies in PADD 1, which includes New York Harbor, the delivery point for the Nymex contract, increased 1.56 million barrels to 56 million.

Pump prices, averaged nationwide, fell 1 cent to $3.366 a gallon, the lowest level since Jan. 28 and 41.8 cents below a year ago, Heathrow, Florida-based AAA said today on its website.

Ultra-low-sulfur diesel for November delivery slipped 0.43 cent to $2.999 a gallon on trading volume that was 13 percent below the 100-day average.

ULSD’s crack spread versus WTI narrowed 71 cents to $22.12 a barrel while the premium over Brent lost 64 cents to $16.50.

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