Bloomberg News

Gasoline Gains as Central Banks Raise Liquidity, U.S. Adds Jobs

December 01, 2011

Nov. 30 (Bloomberg) -- Gasoline rose to a two-week high after central banks led by the Federal Reserve cut emergency dollar funding costs to European banks to ease the region’s debt crisis and as the U.S. added jobs.

Prices gained as the central banks’ move boosted equities and the dollar fell, increasing the investment appeal of commodities. U.S. companies added 206,000 workers in November, reducing concern that unemployment will remain elevated, curbing fuel use. The Energy Department reported that gasoline demand climbed last week.

“The bigger impact was the coordinated action of the central banks to reduce the dollar lending rates, sending stocks higher and oil prices with it,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Underpinning that is an increase in the amount of jobs that were created.”

Gasoline for December delivery gained 2.86 cents, or 1.1 percent, to settle at $2.5677 a gallon on the New York Mercantile Exchange. Prices fell 2.8 percent this month.

The more-actively traded January contract advanced 1.86 cents, or 0.7 percent, to $2.5584 a gallon. December gasoline and heating oil contracts expired today.

Gasoline demand, or deliveries to wholesalers, rose 2.1 percent in the week ended Nov. 25 to 8.77 million barrels a day, the most since the week ended Oct. 7, today’s report showed. Gasoline production fell 3 percent to 9.19 million barrels a day. Inventories increased 213,000 barrels.

“It was Thanksgiving week and people were driving,” said Sander Cohan, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. “Production cutting back is bullish.”

Central Banks

The central banks of the U.S., the euro region, Canada, the U.K., Japan and Switzerland agreed to cut the cost of providing dollar funding via swap arrangements, the Federal Reserve said in a statement.

Futures rose a third consecutive day after the banks’ move, which is aimed at easing financial market strains and boosting the central banks’ capacity to support the global financial system, the statement said.

“It was extremely bold,” said Phil Flynn, vice president of research at PFGBest in Chicago.

The euro gained 0.9 percent against the dollar at 2:49 p.m. in New York while the Standard & Poor’s 500 Index added 3.2 percent.

“The market likes the news because it’s a glimmer of good news in a torrential downpour of bad news. But it’s done for a reason and the reason they did it is not good,” said Ray Carbone, president of Paramount Options Inc. in New York.

Jobs Increase

The 206,000 increase in jobs was the biggest this year and followed a revised 130,000 gain in October, ADP Employer Services said today. Planned firings dropped 13 percent to 42,474 from November 2010, according to figures released today by Chicago-based Challenger, Gray & Christmas Inc.

The jobs reports are “constructive, optimistic kind of news and that helped the rally,” Carbone said.

In other economic news, the Institute for Supply Management-Chicago Inc.’s business barometer rose to 62.6 in November from 58.4 the prior month as orders and production strengthened. The National Association of Realtors’ index of pending home sales increased 10.4 percent, the biggest gain since November 2010.

The Federal Reserve, in its Beige Book survey, said the economy expanded at a “moderate” pace in 11 of 12 districts, led by gains in manufacturing and consumer spending. Only the St. Louis district reported a decline in economic activity.

“From almost every angle, the economy looks pretty good,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida.

Supplies Increase

Heating oil pared gains after the Energy Department reported that distillate stockpiles surged 5.53 million barrels last week to 138.5 million, the biggest gain since January 2009. Demand plunged 20 percent to 3.24 million barrels a day, the lowest level since August 2009.

“The inventory data was not supportive and that gave pause to the idea that distillate inventories are one of the underpinnings of the rally,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Refiners increased heating oil and diesel fuel production 1.2 percent to a record 4.83 million barrels a day. Exports remained at a record high 948,000 barrels a day, based on preliminary weekly reports.

The market “thinks this is bearish, but we had a great Thanksgiving shopping season and export demand is really strong,” Cohan said.

December-delivery heating oil rose 0.03 cent to settle at $3.0214 a gallon, after touching $3.0536 before the inventory report’s 10:30 a.m. release in Washington. Prices fell 0.7 percent this month. The January contract slipped 0.85 cent to $3.0251.

Regular gasoline at the pump, averaged nationwide, was unchanged at $3.295 a gallon yesterday, according to AAA data.

--With assistance from Sho Chandra, Bob Willis, Joshua Zumbrun and Scott Lanman in Washington. 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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