Bloomberg News

Gasoline Jumps as Lower Margins, Maintenance May Limit Output

October 10, 2013

Gasoline gained, outperforming crude and diesel, as lower refinery margins and prices coupled with seasonal maintenance may limit production.

Futures rose as much as 2.1 percent. Phillips 66 (PSX:US)’s Bayway refinery in New Jersey and PBF Energy Inc. (PBF:US)’s Delaware refinery are conducting planned work. Together the plants account for 420,000 barrels a day of capacity in the New York Harbor market. Gasoline’s premium to Brent crude, a rough measure of the profit margin, has dropped to below $2 a barrel from more than $23 in July. The fuel’s premium to West Texas Intermediate has shrunk to about $10 a barrel from $26.29 in July.

“Negative margins will discourage gasoline production,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Prices are also too low to encourage domestic production or imports. U.S. refinery runs will fall and imports will fall.”

Gasoline for November delivery rose 3.55 cents to $2.6585 a gallon at 9:34 a.m. on the New York Mercantile Exchange on trading volume that was 21 percent above the 100-day average. Prices have dropped 15 percent since Aug. 29.

Speculation that supplies will fall also boosted margins today. The motor fuel’s crack spread versus WTI widened $1.53 to $10.09 a barrel. The premium to Brent rose 44 cents to $1.54.

“The maintenance outages on the East Coast at Phillips 66 and PBF will reduce supplies of RBOB in the Harbor,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Pump prices, averaged nationwide, fell 0.3 cent to $3.351 a gallon, 46.2 cents below a year ago, Heathrow, Florida-based AAA said today on its website.

Ultra-low-sulfur diesel for November delivery rose 1.56 cents, or 0.5 percent, to $3.033 a gallon on trading volume that was 20 percent above the 100-day average.

ULSD’s premium versus WTI widened 78 cents to $25.90 a barrel. The crack spread over Brent fell 40 cents to $17.27.

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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Companies Mentioned

  • PSX
    (Phillips 66)
    • $87.02 USD
    • 0.41
    • 0.47%
  • PBF
    (PBF Energy Inc)
    • $28.41 USD
    • 0.16
    • 0.56%
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