Bloomberg News

Gasoline Rises as Refinery Outages Tighten Inventories

September 07, 2012

Gasoline rose as refiners worked to increase production after disruptions caused by Hurricane Isaac reduced U.S. stockpiles to the lowest level since 2008.

Prices gained after plants in the Gulf Coast operated last week at the lowest level since January. Almost one-quarter of U.K. refining capacity is expected to shut in October for planned work, reducing shipments to the East Coast. Tropical Storm Leslie is moving north up the coast and may reach Newfoundland by the middle of next week, the National Hurricane Center said in an advisory at 2 p.m. East Coast time.

“Gasoline couldn’t look more bullish,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “You have sluggish refinery restarts in the Gulf Coast, stocks are already low, you’re getting into turnaround in the U.K. and Leslie is clearly an issue.”

October-delivery reformulated gasoline, or RBOB, advanced 4.31 cents, or 1.4 percent, to $3.0341 a gallon at 1:26 p.m. on the New York Mercantile exchange. Prices have declined 2.3 percent this week.

Spot RBOB in New York jumped 12.12 cents to 35 cents over the October contract, the highest level in almost four years.

Isaac was a Category 1 hurricane that made landfall in Louisiana Aug. 29, causing flooding and power losses and the closure of seven refineries, representing 13 percent of Gulf Coast refining capacity, and the reduction of rates at four other plants.

Refineries Starting

As of today, three Louisiana refineries shut because of the hurricane were restarting and another six were operating at reduced rates, according to data compiled by Bloomberg. Gulf Coast refinery utilization dropped to 82.2 percent last week from 91.4 percent a week earlier, according to department data.

In the PADD 1 region, which includes New York Harbor, the delivery point of Nymex futures, stockpiles are 6.6 percent below a year earlier.

“We’re very tight in the harbor and it doesn’t look like there’s any serious relief,” Lebow said.

Futures also gained as the U.S. added fewer than expected jobs in August, increasing speculation that the Federal Reserve will provide additional fiscal stimulus to boost the economy.

The Labor Department reported an increase of 96,000 jobs last month, following a revised 141,000 rise in July that was smaller than initially estimated. Pacific Investment Management Co.’s Bill Gross said the report will move the Fed closer to more quantitative easing.

“It seems the report started to fan the flames we’ll have some announcement about a stimulus next week,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Unemployment Rate

The median estimate of 92 economists surveyed by Bloomberg called for jobs to increase by 130,000. Unemployment fell to 8.1 percent from 8.3 percent as 368,000 Americans left the labor force.

“The report showed the economy added fewer jobs than expected and that more people are leaving the workforce, which increases speculation that the Federal Reserve will move to stimulate the economy,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Fed Chairman Ben S. Bernanke said last week the central bank may need to do more. The Fed meets Sept. 12-13.

Policy makers will give “strong hints” or provide “positive action” at next week’s rate-setting meeting, Gross, who runs the world’s biggest bond fund, said in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

Regular gasoline at the pump, averaged nationwide, fell 0.1 cent to $3.822 a gallon yesterday, AAA data showed. Prices are up 49.6 cents from the year-to-date low of $3.326 on July 1.

Heating oil for October delivery rose 0.36 cent to $3.1461 a gallon on the exchange. Prices are down 0.7 percent this week.

To contact the reporters 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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