Bloomberg News

Gasoline Falls as U.S. Demand Slides to Eight-Month Low

October 19, 2011

Oct. 19 (Bloomberg) -- Gasoline fell to the lowest level in eight days after the Energy Department reported that demand for the motor fuel in the U.S. slid last week to the least since February.

Futures slipped as deliveries to wholesalers decreased 4.6 percent in the week ended Oct. 14 to 8.6 million barrels a day. On a four-week average, consumption was 1.5 percent below a year earlier. Total fuel use sank 2.2 percent to a six-month low of 18.3 million barrels a day from the prior week.

“It doesn’t have really strong demand behind it and the draws are really because of lower utilization rates,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Gasoline for November delivery sank 7.54 cents, or 2.7 percent, to settle at $2.6715 a gallon on the New York Mercantile Exchange.

Futures deepened losses after the Federal Reserve, in its Beige Book survey released today, said companies are more pessimistic about the economic recovery.

“The economy looks weak, demand looks weak and the problems in Europe are not resolved,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.

Gasoline Supplies

Stockpiles of the motor fuel dropped 3.32 million barrels to 206.3 million, a five-month low. Supplies fell as refiners lowered rates 1.1 percentage points to 83.1 percent of capacity, the lowest level since the week ended May 6.

November-delivery heating oil declined 4.65 cents, or 1.5 percent, to settle at $2.9812 a gallon on the exchange. It was the largest decline since Sept. 28.

Futures touched $3.0611 after the department reported that diesel and heating oil inventories dropped 4.27 million barrels last week to 149.7 million, the lowest level in 13 weeks and largest decline since Nov. 5. Supplies were 12 percent below a year earlier, according to department data. Heating oil use typically rises amid colder winter weather.

“The report is more bullish for heating oil since we’re getting to the heating oil season and should be stocking up,” said Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts.

Temperatures will be below-average in the Midwest from Oct. 18 to Oct. 22 and in the Northeast from Oct. 23 to Oct. 27, said Matt Rogers, president of Commodity Weather Group LLC.

Distillate Demand

Demand for industrial, trucking and home-heating fuels rose 2.8 percent to 4.18 million barrels a day, the most since March. On a four-week average, consumption was 5.8 percent higher than a year earlier.

Futures also weakened after crude oil on the Nymex retreated after failing to break above resistance at $90, touching $89.51 before settling at $86.11, down $2.23.

“Ninety dollars is major resistance,” McGillian said. “The market lost some momentum.”

Brent crude retreated as Greek protesters clashed with police after Prime Minister George Papandreou vowed to push through a further round of austerity as Europe’s leaders struggle to prevent that country’s sovereign debt crisis from engulfing the region’s banks. December-settlement Brent sank $2.76 to $108.39 a barrel on the ICE Futures Europe exchange.

“When you see that kind of unrest that’s not bullish,” said Ray Carbone, president of Paramount Options Inc. in New York and a broker at the New York Mercantile Exchange. “There’s no evidence the debt situation has changed.”

Regular gasoline at the pump, averaged nationwide, rose 0.5 cent to $3.474 a gallon yesterday, according to AAA data. It was the ninth consecutive increase as prices rose to the highest level since Sept. 26.

--With assistance from Joshua Zumbrun in Washington, Mark Deen in Paris, Natalie Weeks and Tom Stoukas in Athens. Editors: David Marino, Richard Stubbe

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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