Gasoline Drops as Global Factory Data Indicates Less Fuel Demand

Feb 03, 2014 3:17 pm ET

Feb. 3 (Bloomberg) -- Gasoline futures slipped as a manufacturing slowdown last month in the U.S., China and the U.K. indicated stalling economic growth and lower fuel demand.

Futures fell 0.9 percent. U.S. factories expanded in January at the weakest pace in eight months. China’s official Purchasing Managers’ Index decreased to a six-month low in January as output and orders slowed. U.K. manufacturing expanded at a slower pace than analysts forecast last month.

“The economic data coming in weaker is weighing on gasoline,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

March-delivery gasoline slipped 2.45 cents to settle at $2.6069 a gallon on the New York Mercantile Exchange on volume that was 9.5 percent below the 100-day average at 2:41 p.m. Prices declined 5.7 percent last month, the most since September.

The Institute for Supply Management’s U.S. factory index decreased to 51.3, lower than the most pessimistic forecast in a Bloomberg survey of economists, from 56.5 the prior month, the Tempe, Arizona-based group’s report showed today.

The Chinese Purchasing Managers’ Index was at 50.5, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Feb. 1 in Beijing. In the U.K., the Purchasing Managers’ Index declined to 56.7 last month from 57.2 in December.

“Slower economic growth outside the U.S. will result in slower increases in demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Crack Spreads

The motor fuel’s crack spread versus WTI rose 3 cents to $13.06 a barrel. Its premium to London-traded Brent crude narrowed 67 cents to $3.45.

The average U.S. pump price declined 0.1 cent to $3.279 a gallon, according to data from Heathrow, Florida-based AAA. Prices have fallen 4.4 cents this year.

Diesel futures in New York strengthened after an earlier 1 percent loss amid concern that tight fuel supplies in the U.S. Northeast will shrink further after the coldest January in 20 years.

Distillate stockpiles near New York Harbor, where the contracts are delivered, are the lowest since 2008, Energy Information Administration data show. Temperatures from the Midwest to the Northeast will be below normal from Feb. 8 through Feb. 16, according to the National Weather Service’s Climate Prediction Center.

“The only reason heating oil is up is that stocks are extremely tight and it’s super cold,” Sen said.

Ultra low sulfur diesel for March delivery widened 1.04 cent to $3.0075 a gallon on the New York Mercantile Exchange. Trading volume was 29 percent above the 100-day average.

March-delivery diesel’s crack spread versus WTI, a rough measure of refining profitability, widened $1.50 to $29.89 a barrel. The premium over European benchmark Brent widened 80 cents to $20.28.

--Editors: Margot Habiby, Richard Stubbe