Gasoline and heating oil futures fell as U.S. Gulf Coast refineries came back online after Hurricane Isaac, boosting supply, and a contraction in U.S. manufacturing indicated oil demand may shrink.
Futures sank after Valero Energy Corp. and Phillips 66 started three refineries, the last three plants remaining shut because of Hurricane Isaac. West Texas Intermediate crude oil fell $1.17 to settle at $95.30 a barrel after the Institute of Supply Management’s factory index fell to 49.6 in August.
“The refineries coming back online, coupled with the fact that oil has fallen off on weak economic data, has shaken off some of the disappointment we saw earlier,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Those refineries made a lot of progress in the last six hours.”
October-delivery gasoline fell 2.06 cents, or 0.7 percent, to settle at $2.9522 a gallon on the New York Mercantile Exchange. Prices climbed 6.6 percent last month.
The ISM sank to the lowest level since July 2009, from 49.8 a month earlier. Economists in a Bloomberg survey had projected an August reading of 50, which is the dividing line between expansion and contraction.
Valero started its Norco and Meraux refineries, and Phillips 66 started its Alliance plant. Hurricane Isaac shut seven refineries in Louisiana with 1.4 million barrels a day of combined capacity and caused three others to reduce rates.
Futures touched $3.0032 a gallon earlier on speculation the refinery outages would persist, reducing fuel supplies. Gasoline inventories probably declined 3 million barrels last week, the median of nine estimates in a Bloomberg survey.
Hedge funds increased net-long positions in gasoline, or wagers on rising prices, by 3 percent in the seven days ended Aug. 28, according to the Commodity Futures Trading Commission’s Commitments of Traders report on Aug. 31. Bullish bets climbed 2,124 to 72,571 in the week ended Aug. 28, the CFTC data show. It’s the highest level since the week ended May 1.
Money managers raised bullish bets on heating oil, a proxy for diesel, for a ninth consecutive week. Net-long wagers advanced 4,352 futures and options combined, or 23 percent, to 23,083, the highest level since the week ended May 8, the CFTC report showed.
Heating oil for October delivery fell 3.34 cents, or 1.1 percent, to settle at $3.1468 a gallon on the exchange. Futures gained 12 percent in August, the biggest monthly rise since September 2010.
Venezuela’s Amuay oil refinery, the country’s largest, will return to full capacity in “days” after restarting some distillation units following a fatal gas explosion on Aug. 25, Oil Minister Rafael Ramirez said. The shutdown had tightened the global supply of oil products, Maria van der Hoeven, head of the Paris-based International Energy Agency, told reporters in New Delhi today.
“If they can get that plant back online, it’s going to present a huge sigh of relief to the region,” Flynn said.
Regular gasoline at the pump, averaged nationwide, fell 0.3 cent to $3.824 yesterday, AAA data showed.
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