Bloomberg News

Gasoline Gains as Fed Keeps Low Interest Rates Through Mid-2013

December 14, 2011

Dec. 13 (Bloomberg) -- Gasoline futures rose, maintaining a gain, after the Federal Reserve repeated a pledge to keep interest rates low through mid-2013 while taking no additional steps to stimulate the economy.

Futures surged 2.4 percent as the Federal Open Market Committee said in a statement that the U.S. economy is maintaining its expansion even as the global economy slows. Gasoline rose as much as 4.4 percent earlier on speculation the Fed would announce a third round of quantitative easing and as oil advanced past $100 a barrel.

“This is neutral to slightly positive because it says the Feds think the economy is improving,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Gasoline for January delivery rose 6.18 cents to settle at $2.6254 a gallon on the New York Mercantile Exchange, the biggest increase in two weeks. Prices are up 7 percent in 2011.

Futures touched $2.6754 earlier on speculation that the central bank would announce further quantitative easing and oil rose on concern that exports from the Persian Gulf might be disrupted.

“The economy has been expanding moderately, notwithstanding some apparent slowing in global growth,” the Federal Open Market Committee said in a statement at the end of its meeting today in Washington. “While indicators point to some improvement in overall labor market conditions, the unemployment rate remains elevated.”

Strait of Hormuz

A spokesman for the Iranian Foreign Ministry denied reports that the Strait of Hormuz was closed and that sea routes for oil shipments would be shut. The Iran’s state-run Fars news agency earlier today said the military was set to conduct drills to close the strait, citing parliamentarian Parviz Sorouri.

Futures also gained amid indications that the European economy may strengthen. German investor confidence rose and Spain sold more debt than planned at an auction.

“This increases confidence a little that Europe may be getting better, so the market rebounded and equities rose,” said Phil Flynn, vice president of research at PFGBest in Chicago.

The Energy Department may report tomorrow that gasoline supplies rose 1.2 million barrels last week, according to the median estimate of 12 analysts in a survey by Bloomberg News.

U.S. gasoline demand fell 3.4 percent last week, the biggest drop in 14 weeks, according to MasterCard Inc.’s SpendingPulse report. Fuel use was 8.76 million barrels a day.

Inventories of distillate fuel, including heating oil and diesel, probably gained 1 million barrels last week, according to the survey.

January-delivery heating oil rose 3.27 cents, or 1.1 percent, to settle at $2.9288 a gallon on the exchange. Prices are up 15 percent this year.

Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.269 a gallon yesterday, according to AAA data.

--With assistance from Joshua Zumbrun and Scott Lanman in Washington, Ladane Nasseri in Tehran, Emma Ross-Thomas in Madrid and Rainer Buergin in Berlin. Editors: Richard Stubbe, 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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