Bloomberg News

Gasoline Falls to Two-Week Low as OPEC Raises Limit, Euro Drops

December 15, 2011

Dec. 14 (Bloomberg) -- Gasoline fell the most since August, following crude oil lower after OPEC raised its production limits and as the dollar strengthened, reducing the investment appeal of commodities.

Prices slid to a two-week low after the Organization of Petroleum Exporting Countries increased its limit to 30 million barrels a day. The euro slipped below $1.30 for the first time since January on concern the European debt crisis is worsening. Losses increased as the Energy Department reported that gasoline supplies rose to the highest level since March.

“OPEC is legitimizing its overproduction, and I interpret it as OPEC will provide the oil its customers ask for,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Products are being dragged down by crude oil and the fact that product inventories continue their rise.”

Gasoline for January delivery declined 12.17 cents, or 4.6 percent, to settle at $2.5037 a gallon on the New York Mercantile Exchange. Prices are up 2.1 percent in 2011.

Crude for January delivery fell $5.19, or 5.2 percent, to $94.95 a barrel on the Nymex. The S&P GSCI Index of 24 raw materials slid 4.1 percent.

OPEC’s new limit compares with actual November production of 30.37 million barrels a day. The previous daily limit, which didn’t include Iraq, was 24.845 million.

Euro Declines

The euro fell 0.4 percent against the dollar to $1.2984 at 3:45 p.m. in New York as German Chancellor Angela Merkel said “there are no easy and fast solutions” to the region’s fiscal crisis. Italy had to pay the most in 14 years to sell five-year bonds.

“The euro is getting slammed,” said Phil Flynn, vice president of research at PFGBest in Chicago. “Europe once again is trumping everything.”

Gasoline inventories jumped 3.82 million barrels to 218.8 million, and have risen 14.7 million barrels, or 7.2 percent, in five weeks of gains. Analysts projected a gain of 1.2 million barrels, according to the median estimate of 12 analysts in a survey by Bloomberg News.

“The gasoline number was very bearish and then there’s all the anxiety about Europe,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “Moves are a little more exaggerated because the volume is down.”

Gasoline Demand

Demand, or deliveries to wholesalers, rose 1.1 percent from the prior week to 8.67 million barrels a day. Measured on a four-week average, demand was 4.5 percent below a year earlier, compared with a 3.5 percent deficit the prior week. The four- week average of total fuel supplied was 5.6 percent below 2010.

“The fact that product inventories are rising in conjunction with significant declines in year-on-year demand is putting downward pressure on prices,” Lipow said.

Stockpiles of heating oil and diesel rose 480,000 barrels last week to 141.5 million, a six-week high, even as output fell 1.1 percent.

January-delivery heating oil fell 9.89 cents, or 3.4 percent, to $2.8299 a gallon on the exchange, the lowest level since Oct. 5. Prices are up 11 percent this year.

Demand for distillate fuels rose 0.8 percent to 3.95 million barrels a day. On a four-week average, consumption was 1.8 percent higher than a year earlier.

Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.264 a gallon yesterday, according to AAA data.

--With assistance from Chiara Vasarri in Rome, Tony Czuczka and Brian Parkin in Berlin and Ayesha Daya, Fred Pals and Lananh Nguyen in Vienna. 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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