Bloomberg News

Gasoline Falls to 5-Month Low on U.S. Jobs Data, Slower Growth

June 01, 2012

Gasoline slid to a five-month low, erasing a yearly gain, as the U.S. and European labor markets weakened and factory output slowed in China and Europe, threatening demand for fuel.

Futures sank as U.S. payrolls rose 69,000, the fewest gains in a year, Labor Department figures showed. The Chinese Purchasing Managers’ Index (CPMINDX) fell to 50.4 in May from 53.3 in April, China’s statistics bureau and logistics federation. A gauge of manufacturing in Europe fell to a three-year low. Heating oil slid to a 16-month low.

“The unemployment rate didn’t help what was already an extremely negative tone in the market,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut. “Supplies are tight and demand picked up, but with the rest of the world in free-fall it’s going to be hard to prevent products falling as well.”

Gasoline for July delivery tumbled 6.59 cents, or 2.4 percent, to $2.6568 a gallon on the New York Mercantile Exchange, the lowest settlement since Dec. 28.

Prices slid 8.2 percent this week, the biggest weekly loss since Sept. 23. Futures have dropped 1.1 percent this year after being up as much as 27 percent through March 26.

The U.S. jobless rate rose to 8.2 percent from 8.1 percent, while hours worked declined. The Institute for Supply Management’s factory index fell to 53.5 in May from 54.8 a month earlier, the Tempe, Arizona-based group’s report showed.

GDP Estimate

Commerce Department futures yesterday showed gross domestic product climbed at a 1.9 percent annual rate, revised down from a prior estimate of 2.2 percent.

“The U.S. is not as strong and firm in growing the economy as people had hoped for,” said Gordon Elliott, a risk management specialist at Intl FC Stone LLC in St. Louis Park, Minnesota. “What’s this going to do to gasoline demand?”

The unemployment rate in the 17-nation euro zone was a record 11 percent in April and March, the European Union’s statistics office in Luxembourg said. A gauge of manufacturing in the region fell to 45.1 from 45.9 in April, London-based Markit Economics said. That’s the lowest level since mid-2009.

“The reports are giving confirmation that even the economy that everyone thought was doing OK, the U.S., is not OK,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “Everything is a mess.”

Broad Decline

Futures’ slide was part of a broad market plunge in commodities and equities. The Dow Jones Industrial Average (INDU) erased its 2012 gain. Crude oil for July delivery on the Nymex slid 3.8 percent to a seven-month low $83.23. The Standard & Poor’s GSCI index of 24 materials lost 2.5 percent at 2:53 p.m. in New York.

The broad market slide could spur a rally next week on speculation that the Federal Reserve will step in with a third round of large scale asset purchases, or QE3, to stabilize the economy.

“Literally every piece of data out of the world this week was negative,” Chirichella said. “We’re getting close to a recession and the Fed is going to have to try and do something. If the market believes that a QE3 is coming, you get buying coming in.”

The Energy Department reported yesterday that gasoline supplies slipped 833,000 barrels last week to 200.2 million, the lowest level since November 2008. Gasoline demand, measured by deliveries to wholesalers, rose 3.5 percent to 8.93 million barrels a day as Americans filled their tanks before the Memorial Day holiday weekend.

Heating Oil

July-delivery heating oil fell 7.53 cents, or 2.8 percent, to $2.6279 a gallon, the lowest settlement since Jan. 25, 2011. The fuel lost 7.1 percent this week, its biggest decline since Sept. 23. Prices have tumbled 10 percent this year.

Inventories of distillates, including diesel and heating oil, declined 1.71 million barrels, or 1.4 percent, to 117.8 million, the lowest level since June 2008. Wholesale demand for distillates rose 7 percent to 3.86 million barrels a day.

Regular gasoline at the pump, averaged nationwide, fell 0.9 cent to $3.611 a gallon yesterday, according to AAA. It was the lowest level since Feb. 21. Gasoline is down 8.3 percent since reaching a 2012 high of $3.936 on April 4.

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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