Bloomberg News

Gasoline Falls on Concern European, U.S. Economies Weakening

November 23, 2011

Nov. 23 (Bloomberg) -- Gasoline futures retreated for the first time in three days after a German bond auction fell short of expectations, deepening concern that Europe’s debt crisis will spread, and as U.S. reports showed no economic gains.

Futures fell 1.7 percent as Germany failed to get bids for 35 percent of the 10-year bonds offered for sale today. In the U.S., orders for durable goods fell, Americans pulled back on spending and initial jobless claims rose. The Energy Department reported that gasoline inventories rose to a seven-week high.

“If Germany is having trouble selling their bonds, what chance do Italy or Spain have?” said Phil Flynn, vice president of research at PFGBest in Chicago. “And the weak economic data in the U.S. is adding to concern about a slowing global economy.”

Gasoline for December delivery lost 4.41 cents to settle at $2.5177 a gallon on the New York Mercantile Exchange, the first decline in three days. Prices lost 4.2 percent this week, the biggest decline since Sept. 14.

Applications for jobless insurance increased by 2,000 in the week ended Nov. 19 to 393,000, the Labor Department said.

Bookings for equipment meant to last at least three years fell 0.7 percent after a 1.5 percent drop in September, according to Commerce Department data. Consumer purchases, which account for 70 percent of the economy, increased 0.1 percent after a 0.7 percent gain in September.

China Manufacturing

Gasoline fell along with crude oil as a preliminary purchasing managers’ index showed China’s manufacturing this month shrank by the most since March 2009. The reading of 48 reported by HSBC Holdings Plc and Markit Economics compares with a final number of 51 last month.

“It’s economics again,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “The China PMI number and the German bond auction started the ball rolling lower. And durable goods are down and you have a small increase in jobless claims.”

Inventories of gasoline rose 4.48 million barrels to 209.6 million barrels, the highest level in seven weeks and the most since the week ended Feb. 4. Refiners increased gasoline production by 3.7 percent to 9.47 million barrels a day, the highest in 12 weeks. Refiners increased overall rates 0.7 percentage point to 85.5 percent of capacity.

Gasoline imports rose 194,000 barrels, or 25 percent, to an average 956,000 barrels a day, the highest level since the week ended June 10.

Market ‘Swamped’

“The gasoline market is getting swamped with inventories and imports and demand is weak,” said Sander Cohan, an analyst with Energy Security Analysis Inc in Wakefield, Massachusetts.

Gasoline demand, or deliveries to wholesalers, fell 0.4 percent to 8.59 million barrels a day. On a four-week average, gasoline consumption was 4 percent below a year earlier.

Demand for industrial, trucking and home-heating fuels fell 2.9 percent to 4.07 million barrels a day in the week ended Nov. 18, the lowest in six weeks. On a four-week average, consumption was 5.7 percent higher than a year earlier.

“Gasoline demand is going to spook people more than distillate demand because gasoline demand has been weak for a while,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston.

Stockpiles of heating oil and diesel declined 770,000 barrels in the seven days ended Nov. 18 to 133 million, the lowest level since December 2008. It was the eighth consecutive decline.

December-delivery heating oil fell 7.55 cents, or 2.5 percent, to settle at $2.9591 a gallon, the lowest level in six weeks. Prices declined 5.6 percent this week, the biggest percentage drop since the week ended May 11.

Regular gasoline at the pump, averaged nationwide, declined 1.1 cents to $3.329 a gallon yesterday, according to AAA data.

--With assistance from Timothy R. Homan, Shobhana Chandra and Alex Kowalski in Washington and Paul Dobson in London. Editors: Charlotte Porter, Richard Stubbe, Bill Banker

To contact the reporter on this story: Barbara J Powell in Dallas at

To contact the editor responsible for this story: Dan Stets at

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