Bloomberg News

Gasoline Declines on Speculation European Economies Weakening

October 03, 2011

Oct. 3 (Bloomberg) -- Gasoline fell on concern that Greece’s debt crisis will spread, curtailing fuel demand in Europe and threatening the global economy.

Futures declined as European officials prepared to consider how to shield banks from the debt crisis and boost the region’s rescue fund after Greece missed a deficit target for 2012. Europe’s manufacturing industry contracted for a second month in September, adding to signs the euro-area economy is edging toward a recession.

“If Greece defaults, what’s the effect on French and German banks and other Europeans countries having trouble with their own debt?” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “There’s also signs that the U.S. economy is sputtering.”

Gasoline for November delivery fell 2.71 cents, or 1.1 percent, to settle at $2.511 a gallon on the New York Mercantile Exchange. Prices touched $2.4925. Futures fell 13 percent in September and in the third quarter.

Gasoline’s drop coincides with a broader decline in equities and commodities and a surge in the dollar, which reduces the investment appeal of commodities. Crude oil on the Nymex fell $1.59 to $77.61, the lowest since Sept. 28, 2010. Brent oil for November settlement lost $1.05 to $101.71 a barrel on the London-based ICE Futures Europe exchange.

S&P GSCI

The S&P GSCI Index of 24 raw materials lost 0.9 percent and the Standard & Poor’s 500 Index of stocks fell 2.9 percent to below 1,100 for the first time in more than a year. The U.S. currency advanced 1.6 percent against the euro.

“All these markets are so intertwined now and there’s concerns about the future performance by the global economy,” said Mark Anderle, a trader at Truman Arnold Cos. in Dallas. “The trend remains down.”

A manufacturing gauge based on a survey of purchasing managers in the 17-nation euro region fell to 48.5 from 49 in August, London-based Markit Economics said today.

Futures pared losses after a report that U.S. factory output rose in September. The Institute for Supply Management’s factory index increased to 51.6 from 50.6 the prior month, the Tempe, Arizona-based group said today. A reading above 50 indicates expansion.

Projected Drop

Economists projected the gauge would drop to 50.5, according to the median forecast in a Bloomberg News survey.

November gasoline traded at a 4.78-cent premium to December futures on speculation the refinery shutdowns will crimp supplies in the short term.

ConocoPhillips stopped production of its 190,000-barrel-a- day refinery in Trainer, Pennsylvania, on Sept. 30, saying it would shutter the plant permanently within six months if it can’t sell it. A 106,500-barrel-a-day refinery in Pasadena, Texas, owned by a unit of Petroleo Brasileiro SA, was shut on Sept. 30 after a fire at a crude unit.

Royal Dutch Shell Plc shut its 500,000-barrel-a-day refinery in Singapore in Sept. 28 after a fire and today declared force majeure, exempting it from future contracts.

“Trainer just shut down, Lyondell shut and Shell Singapore took half a million barrels a day out of the market, and that has the spread popping,” Anderle said.

Heating oil for November delivery fell 2.64 cents, or 1 percent, to settle at $2.7529 a gallon, after touching $2.7436. Futures lost 9.2 percent last month, the biggest drop since May 2010, and declined 4.7 percent in the third quarter.

Regular gasoline at the pump, averaged nationwide, slipped 0.7 cent to $3.417 a gallon yesterday, according to AAA data. It’s the lowest level since March 1.

--With assistance from James G. Neuger in Brussels, Simone Meier in Zurich and Bob Willis in Washington. Editors: David Marino, Dan Stets

To contact the reporter on this story: Barbara J Powell in Dallas at bpowell4@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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