Gasoline Caps Biggest Monthly Gain Since July as Demand Grows

Dec 31, 2013 4:26 pm ET

Dec. 31 (Bloomberg) -- Gasoline futures capped the biggest monthly gain since July as demand for the motor fuel surged while supply was constrained.

Prices rose 3.8 percent in December. Trading volume was 47 percent below the 100-day average at 2:39 p.m. in New York. A French refinery strike and plant upsets in the U.S. reduced supply earlier in the month as demand increased.

“Today is expiration and traders are only taking what they need,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Volumes are very, very low. But products are supported by the knowledge we’re going into turnaround season next month and by good demand from the EIA.”

Gasoline for January delivery fell 0.19 cent to $2.7858 a gallon on the New York Mercantile Exchange. Prices gained 5.7 percent in the three months ended today, the biggest fourth- quarter increase since 2010. The motor fuel retreated 0.9 percent this year, the first annual decline since 2008.

Total SA’s five refineries in France have returned to operation after a strike that began Dec. 13 and reduced shipments of gasoline to the U.S. from Europe. U.S. gasoline demand in the four weeks ended Dec. 20 was 3.9 percent above a year earlier, Energy Information Administration data show.

Gasoline strengthened this quarter even as refiners restarted units following maintenance and unplanned shutdowns, pushing production to record levels. Output jumped 4.3 percent to 9.72 million barrels a day in the week ended Dec. 20, a record in EIA data going back to 1982.

Refineries Return

“Refineries came back after maintenance and demand was able to absorb” the additional output, said Joe Posillico, senior vice president of energy derivatives at Jefferies Bache LLC in New York.

January gasoline and ultra low sulfur diesel futures expired at the close of floor trading today. The more actively traded February gasoline contract declined 0.1 cent to $2.7859 a gallon.

The motor fuel’s crack spread versus WTI, a rough measure of refining profitability, widened 83 cents to $18.59 a barrel. Gasoline’s premium to London-traded Brent crude gained 37 cents to $6.21 a barrel.

The average U.S. pump price climbed 0.6 cent to $3.318 a gallon, the 12th consecutive increase and the highest level since Oct. 23, according to Heathrow, Florida-based AAA.

ULSD for January delivery was unchanged at $3.0772 a gallon on volume that was 30 percent below the 100-day average. The futures climbed 1 percent in December and 3.6 percent in the quarter, the largest three-month gain since the third quarter of 2012. Diesel rose 1.1 percent in 2013.

February futures advanced 0.91 cent, or 0.3 percent, to $3.0652 a gallon.

The fuel’s crack spread versus West Texas Intermediate crude widened $1.25 to $30.32 a barrel. The premium over European benchmark Brent rose 79 cents to $17.94.

--Editors: David Marino, Charlotte Porter