Gasoline Rises to Four-Week High as Demand Gains Before Holiday

Dec 19, 2013 4:37 pm ET

Dec. 19 (Bloomberg) -- Gasoline rose for a fourth day, reaching a four-week high as demand for the motor fuel climbed before the Christmas holiday, indicating supplies may decline.

The Energy Information Administration reported yesterday that supplies along the U.S. East Coast, or PADD 1 region, fell last week amid lower imports and higher demand. U.S. travel from Dec. 21 to Jan. 1, during the Christmas and New Year’s holidays, will increase for a fifth straight year to a record, boosted by more automobile trips, AAA said on Dec. 17.

“The inventory report was positive,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “PADD 1 stocks drew, a sign underlying demand is really pretty strong.”

Gasoline for January delivery rose 4.28 cents, or 1.6 percent, to $2.7401 a gallon on the New York Mercantile Exchange, the highest settlement since Nov. 21. Trading volume was 1.6 percent above the 100-day average as of 3:05 p.m. Futures have jumped 4.2 percent in four days and are up 2.1 percent this month.

Stocks in PADD 1, which includes New York Harbor, the delivery point for futures contracts, fell 1.4 percent and imports slipped 15 percent. U.S. gasoline demand jumped 8 percent last week and over the past four weeks is up 3.7 percent from a year ago. Total petroleum demand jumped 13 percent to the highest since 2008.

Refinery Strike

A French refinery strike that has shut four of Total SA’s five plants in that country threatens to reduce gasoline imports from Europe while increasing the demand for U.S. diesel exports to the region. The strike over workers’ pay entered its seventh day today.

“Products have been supported by the French strike and significant increases in demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

The motor fuel’s crack spread versus West Texas Intermediate, a rough measure of refining profitability, widened 82 cents to $16.31 a barrel. Gasoline’s premium to Brent increased 99 cents to $5.08 a barrel.

Gasoline’s discount to ultra low sulfur diesel narrowed to 29.05 cents, the smallest since Nov. 21.

“There’s the potential for gasoline to outperform in terms of price,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We still have valuations that are relatively cheap in comparison with heating oil or in comparison with Brent.”

Pump Price

The average U.S. pump price slipped 0.4 cent to $3.212 a gallon, the 11th consecutive decline, Heathrow, Florida-based AAA said today. Prices are the lowest since Nov. 19, and are down 1.4 cents from a year earlier.

Supplies of distillates, including diesel and heating oil, fell 2.11 million barrels to 116 million. PADD 1 distillate supplies declined 1.24 million barrels to 36.5 million. U.S. demand jumped 24 percent.

“The EIA report was supportive for prices,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

ULSD for January delivery gained 2.05 cents, or 0.7 percent, to settle at $3.0306 a gallon on volume that was 2.6 percent below the 100-day average.

ULSD’s crack spread versus WTI narrowed 10 cents to $28.52 a barrel. The premium versus Brent rose 11 cents to $16.77 a barrel.

--Editors: David Marino, Richard Stubbe