Bloomberg News

Gasoline Rises on Concern Refinery Outages to Curb Fuel Supplies

February 01, 2012

Jan. 31 (Bloomberg) -- Gasoline rose, capping the biggest monthly gain since April, on concern that reduced refining capacity will limit supplies as the summer demand season approaches.

Gasoline, best-performing energy commodity in the Standard & Poor’s GSCI Spot Index this year, climbed after ConocoPhillips shut a fluid catalytic cracker at its Bayway refinery in New Jersey for repairs over the weekend. Hess Corp. may also shut a catalytic cracker at the nearby Port Reading refinery for about three weeks and is assessing repairs to the unit, the company said Jan. 25.

“There are concerns on what’s going to happen with all these refineries shutting down as we get closer to the summer driving season,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “It’s making the market nervous about supplies going forward.”

Gasoline for February delivery rose 1.67 cents, or 0.6 percent, to settle at $2.8874 on the New York Mercantile Exchange. Prices rose 7.5 percent this month.

The more actively traded March contract gained 1.82 cents to $2.8909 a gallon. February gasoline and heating oil contracts expired at the close of floor trading today.

The unplanned outage at Bayway followed Hovensa LLC’s plans to shut its 350,000-barrel-a-day St. Croix plant in the U.S. Virgin Islands next month. Two unprofitable Pennsylvania refineries have already been closed.

A possible workers strike at some U.S. refineries also threatens production.

BP Whiting

BP Plc plans to reduce output at the Whiting refinery in Indiana to a level that “maintains safe winter operations” in the event of a strike, the company said in an e-mailed statement. Valero Energy Corp. will shut down the Memphis, Tennessee, plant, in the event of a strike, CEO Bill Klesse said on a conference call with analysts.

A labor contract between producers and the United Steelworkers union expires at midnight Central time. If no deal is reached, the union may strike or agree to extend negotiations in 24-hour increments.

The union representing more than 30,000 U.S. refinery workers rejected a fourth contract offer from producers as the two sides work on a new agreement, according to three union representatives familiar with negotiations.

February-delivery heating oil rose 1.1 cents, or 0.4 percent, to $3.0628 a gallon on the exchange. The contract gained 4.4 percent this month. March heating oil increased 1.31 cents to $3.0509.

Regular gasoline at the pump, averaged nationwide, rose 1.4 cents to $3.443 yesterday, according to AAA data. Prices were 11 percent higher than a year earlier.

--With assistance from Barbara J Powell in Dallas. Editors: David Marino, Richard Stubbe

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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