Bloomberg News

Heating Oil, Gasoline Increase Yearly Gains on Refinery Closures

January 02, 2012

Dec. 30 (Bloomberg) -- Heating oil and gasoline advanced, adding to their third consecutive yearly gains, on speculation gasoline imports will drop and demand for U.S. diesel exports will rise when three refineries in Europe shut in January.

Futures climbed as Petroplus Holdings AG, Europe’s largest independent refiner by capacity, will suspend operations at plants with a combined processing capacity of 337,300 barrels of crude a day after banks froze $1 billion of the company’s loans, cutting oil supplies. Prices advanced in 2011 as the U.S. became a net exporter of fuels for the first time since 1949.

“The story on Petroplus is the perfect example of why Europe matters when it comes to oil prices,” said Phil Flynn, vice president of research at PFGBest in Chicago. “These guys can’t get credit and they’re shutting down refineries.”

January-delivery heating oil rose 1.75 cents, or 0.6 percent, to settle at $2.935 a gallon on the New York Mercantile Exchange. Prices advanced 15 percent in 2011, after gaining 20 percent in 2010.

Futures sank 2.9 percent this month and climbed 5 percent since the end of September, the first gain in three quarters.

January gasoline and heating oil contracts expired today. The more actively traded February contract fell 0.59 cent to $2.9142 a gallon.

Petroplus will start shutting its French Petit Couronne refinery, the Antwerp plant in Belgium and Switzerland’s Cressier complex in January, the company said today in a statement. The refiner also operates in Germany and the U.K.

Shutting Refineries

“Shutting refineries in Europe on top of those closed in the Northeast could be giving the market a little bit of a boost,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Three Pennsylvania refineries that account for about half of Northeast capacity are for sale, and two have already closed.

The 3-2-1 crack spread, a measure of profit from turning three barrels of Brent crude into two barrels of gasoline and one of heating oil, based on February contracts, increased 21 cents to $7.83 a barrel, based on settlement prices. That’s the highest level since Oct. 17.

“I’m expecting in the near term to see support for the cracks on the back of the Petroplus shutdowns,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Fuel Exports

The U.S. exported a record 1.07 million barrels a day of heating oil and diesel fuel in October, the Energy Department reported yesterday. About 18 percent, or 196,000 barrels a day, went to the Netherlands, the top destination for U.S. diesel and heating oil cargoes, Energy Department data show.

Gasoline for January delivery rose 0.62 cent to $2.6863 a gallon. Prices finished the year up 9.5 percent, after jumping 41 percent in the first four months. Futures gained 20 percent last year and doubled in 2009.

Futures gained 4.6 percent in December, the biggest monthly advance since April. Prices in the quarter climbed 2.3 percent.

The February contract fell 1.2 cents, or 0.4 percent, to $2.6574 a gallon on the exchange.

Regular gasoline at the pump, averaged nationwide, climbed 1.5 cents to $3.269 a gallon yesterday, according to AAA data. Prices were 6.4 percent above a year earlier.

--With assistance from Nidaa Bakhsh in London and Angeline Benoit in Madrid. 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: Bill Banker at bbanker@bloomberg.net


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