Bloomberg News

Gasoline Gains Most in Three Weeks After European Debt Accord

October 27, 2011

Oct. 27 (Bloomberg) -- Gasoline rose the most in three weeks as European leaders agreed to enlarge a rescue fund, lessening concern that the region’s sovereign debt crisis would slow the global recovery.

Futures surged 3.4 percent as governments boosted the fund to 1 trillion euros ($1.4 trillion) and persuaded bondholders to take 50 percent losses on Greek debt. Measures also included a recapitalization of European banks.

“It is a big exhale today,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Lots of investors are happy with the details. Catastrophe is off the table for the first time.”

Gasoline for November delivery rose 9.04 cents to settle at $2.742 a gallon on the New York Mercantile Exchange. The more actively traded December contract gained 8.19 cents, or 3.1 percent, to $2.7072.

Before today, the front-month contract had lost 13 percent since Aug. 31 on concern that European leaders would not act soon enough or effectively enough to prevent the sovereign debt crisis from triggering another global recession.

“This buys us a good two to three months of those problems not being at boiling temperature,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

As next week’s Group of 20 summit looms, nations from Greece to Italy remain under pressure to restore fiscal order.

Wider Support

French President Nicolas Sarkozy, who will host the G-20 summit Nov. 3-4, conferred with his Chinese counterpart Hu Jintao as European policy makers seek wider support for an enlarged rescue fund.

“The devil’s in the details but, at least for today, the mood is favorable,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Futures widened gains after U.S. Commerce Department figures showed that gross domestic product grew at a 2.5 percent annual rate in the third quarter.

Household purchases, the biggest part of the economy, increased at a 2.4 percent pace. The increase in consumer spending followed a 0.7 percent gain in the second quarter and exceeded the 1.9 percent median forecast in a survey by Bloomberg News.

“The market is happy about the European solution to the debt crisis, there was a good economic growth number in the U.S. and we had inventory draws in gasoline,” said Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts.

Gasoline Inventories

Inventories of the motor fuel are the lowest since April after dropping 1.35 million barrels to 204.9 million in the week ended Oct. 21, according to Energy Department data.

The Labor Department reported that first-time jobless claims fell by 2,000 to 402,000 last week. The number of people collecting unemployment benefits declined by 96,000 to 3.65 million, the fewest since September 2008.

“Today’s 2.5 percent growth in the U.S. is very good,” Chirichella said. “Directionally at least, jobless claims went down. Maybe we’re turning the corner a little.”

Gasoline’s gain coincided with a broad rally in commodities and equities and a weakening of the dollar as the euro surged on the bailout details.

The U.S. currency slid 2.2 percent against the euro as of 3:07 p.m. in New York. A weaker dollar increases the investment appeal of commodities.

The S&P GSCI Index of 24 raw materials rose 3.1 percent and the Standard & Poor’s 500 stock index rallied 3.6 percent. Crude oil for December delivery in New York gained 4.2 percent to $93.96 while Brent crude on the ICE Futures Europe exchange jumped 2.9 percent to $112.08.

November-delivery heating oil increased 8.26 cents, or 2.7 percent, to settle at $3.0984 a gallon on the exchange. The December contract rose 8.27 cents, or 2.7 percent, to $3.1037.

Regular gasoline at the pump, averaged nationwide, rose 0.3 cent to $3.444 a gallon yesterday, according to AAA data.

--With assistance from James G. Neuger in Brussels and Jonathan Stearns in Brussels, Helene Fouquet in Paris, Simon Kennedy in London and Alex Kowalski and Shobhana Chandra in Washington. Editors: David Marino, Charlotte Porter

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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