Gasoline slid on speculation that higher pump prices will reduce demand and after reports that President Barack Obama and U.K. Prime Minister David Cameron discussed using U.S. oil reserves to stem price increases.
Futures fell as gasoline demand over the four weeks ended March 9 dropped 7.2 percent from a year earlier, the Energy Department reported yesterday. Retail gasoline has jumped 17 percent this year, according to Heathrow, Florida-based AAA. Obama and Cameron discussed energy costs yesterday without making a decision on using strategic stockpiles, said Jay Carney, White House press secretary.
“It triggered some selling,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “I’m surprised it didn’t come off a little bit more. There’s a lot of long speculation in gasoline and it may be due for a correction.”
Gasoline for April delivery fell 5.85 cents, or 1.7 percent, to settle at $3.2885 a gallon on the New York Mercantile Exchange. Futures have gained 22 percent this year, making the fuel the best performer in the Standard & Poor’s GSCI index of 24 commodities.
Volume in electronic trading was 162,589 contracts as of 3:20 p.m. in New York, 21 percent above the three-month average of 134,000 through yesterday.
Cameron, speaking to reporters in New York today, said he and Obama “didn’t reach a decision yesterday about oil reserves but we discussed the issue. It is important that we do what we can to try to help families who are trying to make their family budgets add up.”
Congressional Democrats have urged the president to use the reserve amid a standoff with Iran over its nuclear program, while Republican presidential candidates have attacked Obama over costlier gasoline. Retail prices have surged 54.3 cents this year, data from AAA show.
“The headlines today show political sensitivity to the high prices the consumer is paying and the market’s reaction to the possibility there may be a supply disruption in the Middle East,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Part of the reason for high prices is the geopolitical risk premium.”
The April gasoline crack spread on the Nymex fell $2.14 to $33.01 a barrel after yesterday reaching the highest level for the front-month spread since August.
A release from the U.S. Strategic Petroleum Reserve “doesn’t help products whatsoever, but some investors might think so,” said Amrita Sen, a London-based analyst at Barclays Capital. “But gasoline stats weren’t great; the crack spread was very high. We have seen a huge amount of investment going into this market and that may be why it’s coming off.”
Demand at the pump fell 7.2 percent below the year-earlier level last week, the biggest drop in that measure in more than two years, MasterCard Inc. (MA) said March 13 in its SpendingPulse report. It was the 28th consecutive week that consumption was lower than the year before.
“The market is probably thinking about the weakness that we’ve seen in demand and pulling back a little,” said Phil Flynn, vice president of research at PFGBest in Chicago.
Heating oil for April delivery slipped 3.93 cents, or 1.2 percent, to settle at $3.2225 a gallon.
Regular gasoline at the pump, averaged nationwide, rose 1 cent to $3.821 a gallon yesterday, according to AAA, the nation’s biggest motoring group. Prices are 7.5 percent higher than a year ago.
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