Bloomberg News

Gasoline Futures Slide as Weaker Brent Reduces Import Prices

March 19, 2013

Gasoline fell as Brent crude oil, the pricing basis for gasoline imports, weakened versus West Texas Intermediate. Gasoline’s crack spread over WTI narrowed to the lowest level in a month.

Futures lost as much as 2.6 percent as Brent’s premium to WTI slipped to a two-month low. Brent weakened amid a recovery in North Sea oil production, the imminent return of South Sudan oil exports and concern that an upcoming vote in Cyprus on an unprecedented bank levy threatens the euro area economy.

“The Brent is clearly being impacted by the events in Cyprus and concerns over the economy in Europe and the return of North sea oil production and exports from the Sudan,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Gasoline for April delivery fell 6.98 cents, or 2.2 percent, to $3.0591 a gallon at 12:51 p.m. on the New York Mercantile Exchange as trading volume was 24 percent above the 100-day average for the time of day. The contract is for reformulated gasoline to be blended with ethanol, or RBOB.

Cypriot lawmakers may shoot down the tax on bank deposits, risking the island’s membership in the euro.

The “feeling I’m having is that the house is going to reject it because they feel and think it isn’t just and that it’s against the interest of Cyprus,” Cypriot President Nicos Anastasiades told Sweden’s TV4 channel in an interview today.

Crack Spreads

The April crack spread versus WTI narrowed $2.07 to $35.60 a barrel. The May spread against Brent oil on ICE Futures Europe Exchange fell $1.33 to $20.10.

The premium of Brent over WTI dropped 48 cents to $14.92 a barrel, and touched $14.67, the smallest gap since Jan. 17.

Gasoline futures fell as low as $3.0478, the lowest intraday price this month, on speculation that supplies will rise as refineries complete spring maintenance and increase production to take advantage of wide profit margins.

Planned turnarounds between January and March took 1.13 million barrels a day of crude processing capacity offline, according to IIR Energy, a Sugar Land, Texas-based energy- information provider. From April to June, that figure will drop to 676,000 barrels.

“U.S. refineries are starting to come back from turnaround and that is definitely impacting product markets,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

Gasoline Production

Gasoline output rose 4 percent to 8.95 million barrels a day in the week ended March 8 even as refiners processed the least amount of oil in almost two years, Energy Information Administration data show.

“These are good refinery margins and when refineries come out of maintenance, gasoline supplies should increase,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

The EIA is scheduled to report last week’s inventories tomorrow. The agency will probably say gasoline stockpiles declined 1.88 million barrels while distillate supplies fell 1 million barrels, according to the median of 10 analyst estimates compiled by Bloomberg.

Heating oil for April delivery declined 6.2 cents, or 2.1 percent, to $2.8647 a gallon on volume that was 64 percent above the 100-day average for the time of day. Prices touched $2.859, the lowest intraday level since Aug. 3.

Gasoil for April delivery declined $13 to $900 a metric ton on ICE, after touching a three-month low of $898.75.

“Gasoil is very weak in Europe and that is affecting heating oil,” Sen said.

Gasoline at the pump, averaged nationwide, rose 0.7 cent to $3.692 a gallon, AAA said today on its website. It was the first increase in six days. Prices have dropped 9.4 cents since reaching year-to-date high of $3.786 on Feb. 26 and are 15 cents below a year ago.

To contact the reporter on this story: Barbara 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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