Bloomberg News

Gasoline Futures Rise in N.Y. on Speculation of Further Stimulus

July 09, 2012

Gasoline rose on speculation that a struggling U.S. jobs market, Europe’s debt crisis and a slowdown in China will prompt more fiscal easing to stimulate growth.

Futures gained as Federal Reserve Bank of Chicago President Charles Evans said the central bank should move more forcefully to lower the jobless rate. Chinese Premier Wen Jiabao said the downward economic pressure is still “relatively large” and the government will intensify policy fine-tuning. Euro-area finance ministers are meeting in Brussels on the debt crisis.

“Europe is in a recession, the U.S. is marginally in a recession, China is way above a recession but weakening,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “The global economy is simply slowing and the expectation is for more easing,”

August-delivery gasoline advanced 4.99 cents, or 1.8 percent, to $2.7659 a gallon at 2:05 p.m. on the New York Mercantile Exchange. The contract is for reformulated gasoline, or RBOB, delivered into New York Harbor.

Boston Federal Reserve President Eric Rosengren said at the Sasin Bangkok Forum that a struggling labor market threatens to slow household spending as Europe’s fiscal crisis adds to uncertainty that’s restraining hiring and investment.

“The odds are increasing for the U.S. to enter more quantitative easing,” Chirichella said.

The U.S. central bank bought $2.3 trillion of securities In two rounds of so-called quantitative easing, known as QE1 and QE2, from 2008 to 2011 to support the economy. Speaking to reporters after his speech, Rosengren called the June job figures “disappointing” and said a third round of easing, known as QE3, is possible depending on economic data.

QE3 Hype

“There’s just ongoing hype related to a potential QE3 and we’re trying to price at least a U.S. easing into the market,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania.

Labor Department figures released July 6 showed June payrolls climbed 80,000 after a 77,000 increase in May. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg survey. Spain’s 10-year debt yield rose above 7 percent, intensifying concerns about the region’s financial woes.

“The jobs reports and the economic outlook as a whole is weighing on the market,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The report on Spanish bonds is increasing concern about Europe.”

Brussels Meeting

Euro-area finance ministers meet today in Brussels after leaders agreed at a June 28-29 summit to ease the way to direct recapitalization of banks from bailout funds and to start work on Europe-wide bank supervision.

The dollar weakened against the euro, raising commodities’ investment appeal, as European Central Bank President Mario Draghi signaled policy makers may be open to another interest- rate cut if the economic outlook warrants it. The euro gained 0.2 percent against the U.S. currency at 2:05 p.m. in New York.

“The gains are correlated with the pop in the euro,” Schork said.

Heating oil for August delivery rose 4.84 cents, or 1.8 percent, to $2.7583 a gallon on the exchange.

Regular gasoline at the pump, averaged nationwide, increased 0.1 cent to $3.382 a gallon yesterday, the seventh consecutive gain, according to AAA. Prices are down 14 percent from a year-to-date high of $3.936 on April 4 and are 6.4 percent below a year ago.

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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