Sept. 18 (Bloomberg) -- Gasoline jumped the most in two months after the Federal Reserve unexpectedly left intact its level of bond buying and as supplies of the motor fuel fell.
Futures surged 3 percent, after sliding to a nine-month low yesterday. The Fed said it wanted to see evidence that economic gains could be sustained. A government report showed gasoline inventories dropped for the fifth time in six weeks in the week ended Sept. 13.
“The Fed not taking any action puts the investor at ease knowing there’s not going to be risk of another recession anytime soon,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston.
Gasoline for October delivery rose 8.1 cents to settle at $2.7421 on the New York Mercantile Exchange, after settling yesterday at the lowest level since Dec. 17. Trading volume was 3.3 percent below the 100-day average at 4:14 p.m.
The Fed’s Open Market Committee was projected in a Bloomberg survey to reduce the $85 billion pace of monthly bond buying purchases by $5 billion. Instead, the Fed said that “while downside risks” to the outlook have diminished, “the tightening of financial conditions observed in recent months, if sustained, could slow the pace of improvement.”
Gasoline was the second-best performer today in the Standard & Poor’s GSCI index of 24 commodities, trailing only gold. It remains the worst performer this month in the index, down 9.2 percent.
WTI crude for October delivery gained 2.5 percent to settle at $108.07 on the Nymex as crude stockpiles sank to the lowest level since March 2012.
“WTI and gasoline are up by a comparable amount so they’re working together in that regard,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “This is one week’s data. It doesn’t necessarily mean we’re suddenly in a bull market.”
Gasoline inventories nationwide sank 1.63 million barrels to 216 million. Analysts in a Bloomberg survey projected a 500,000-barrel increase.
Supplies in PADD 1, which includes New York Harbor, the delivery point for Nymex products, fell 746,000 barrels to 56.1 million, the lowest level since Jan. 25. Stockpiles on the West Coast, which is isolated from the main refining and demand centers along the Gulf and East coasts, dropped 917,000 barrels, more than half of the nationwide decline.
Consumption jumped 4.9 percent to 9.02 million barrels a day, after sliding 5.4 percent the prior week. Demand over four weeks was 0.5 percent above a year earlier.
“You get the volatility on a weekly basis but demand has been pretty solid on a four-week average,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Products are drawing ahead of refinery maintenance and, if demand holds, you will continue to have draws.”
The motor fuel’s crack spread versus West Texas Intermediate crude widened 75 cents to $7.10 a barrel. The fuel’s premium over Brent increased 84 cents to $3.93.
Pump prices, averaged nationwide, fell 0.6 cent to $3.506 a gallon, 35.3 cents below a year ago, Heathrow, Florida-based AAA said today on its website. Prices have fallen 16 consecutive days to the lowest level since July 9.
Distillate inventories fell 1.08 million barrels to 131.1 million. The survey projected an increase of 500,000 barrels.
“The combination of crude and product draws are bullish,” said David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston.
Ultra-low-sulfur diesel for October delivery rose 4.22 cents, or 1.4 percent, to $3.0405 a gallon on trading volume that was 15 percent above the 100-day average.
ULSD’s crack spread versus WTI narrowed 88 cents to $19.63 a barrel. The premium over Brent fell 65 cents to $17.14.
--With assistance from Joshua Zumbrun in Washington. Editors: David Marino, Charlotte Porter