Sept. 6 (Bloomberg) -- Gasoline climbed as West Texas Intermediate crude jumped to a two-year high and amid speculation that the Federal Reserve will limit or delay cutbacks to stimulus after a weaker-than-expected jobs report.
Prices rose 0.6 percent. The Labor Department reported a gain of 169,000 jobs in August and a drop in the unemployment rate as more people left the workforce. Policy makers may require four months of job growth averaging at least 200,000 to justify reducing the pace of asset purchases, according to Morgan Stanley. WTI futures surged amid escalating tension over Syria and tighter supply in Cushing, Oklahoma.
“This hammers home the notion we’re nowhere near 200,000 jobs a month and the Fed’s tapering will be gradual,” said Jason Schenker, president of Prestige Economics LLC in Austin. “The market is thinking, ‘Hey, more stimulus for longer, that’s good.’”
Gasoline for October delivery gained 1.77 cents to settle at $2.8537 a gallon on the New York Mercantile Exchange. Trading volume was 3.1 percent below the 100-day average at 2:55 p.m.
The Fed, which meets Sept. 17-18, has said it will consider the health of the jobs market in timing a tapering of its $85 billion in monthly bond purchases.
The addition of 169,000 workers in August followed a revised 104,000 gain in July that was 58,000 less than initially estimated. The participation rate slid to the lowest level since 1978 as the share of working-age people in the labor force declined to 63.2 percent.
Fed Bank of Chicago President Charles Evans, a voter on policy this year, told reporters today that he has “an open mind” on whether the Federal Open Market Committee should reduce bond purchases at its September meeting.
“The market’s interpretation of the jobs report is that the Fed tapering will be at a slower rate than had been previously anticipated,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
WTI climbed to $110.53, the highest level since May 2011, as Russian President Vladimir Putin said he will continue supporting Syria if the U.S. launches a strike, increasing concern that escalating tension will disrupt Middle East oil exports. Supplies at Cushing, Oklahoma, the delivery point for the Nymex contract, are the lowest since February 2012.
“This is a crude oil supply driven advance,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “The market might not have risen at all except for aggressive bids on WTI.”
Gasoline fell 5.5 percent this week, the biggest drop since April 5, after the Sept. 2 U.S. Labor Day holiday marked the traditional end of the summer driving season and a switch to winter-grade fuel, which is cheaper to refine. Crack spreads and calendar spreads also narrowed, reflecting ample fuel supply.
Demand over the four weeks ended Aug. 30 was 0.3 percent below a year earlier, according to data from the Energy Information Administration. Inventories of the motor fuel are 17.1 million barrels, or 8.6 percent, above a year earlier.
“Look at your calendars,” Schenker said. “It’s tough to be bullish past Labor Day. You’re trading October gasoline, and we’re moving into the post-driving season shoulder lull.”
The motor fuel’s crack spread versus West Texas Intermediate crude slipped $1.42 to $9.33 a barrel, the smallest premium since Dec. 7, 2011. The fuel’s premium over Brent narrowed 47 cents to $3.74 a barrel, the least since January.
The October contract’s premium to November narrowed 0.33 cent to 1.04 cents, the smallest since June 20. The front-month contract has not been in contango, or valued less than later- month contracts, since April 30.
“You’re seeing the calendar spread structure weakening,” Evans said. “This reflects considerably soft consumer demand expectations.”
Pump prices, averaged nationwide, fell 0.3 cent to $3.584 a gallon, Heathrow, Florida-based AAA said today on its website. Retail gasoline is 23.9 cents below a year earlier.
Ultra-low-sulfur diesel for October delivery rose 2.4 cents, or 0.8 percent, to $3.1637 a gallon on trading volume that was 25 percent below the 100-day average. Prices are rose 0.8 percent this week, the fourth consecutive increase.
ULSD’s crack spread versus WTI narrowed $1.15 to $22.35 a barrel while the premium over Brent increased 15 cents to $16.76.
--With assistance from Shobhana Chandra in Washington and Steve Matthews in Atlanta. Editors: David Marino, Charlotte Porter