Gasoline Pares Weekly Gain on Speculation Imports to Increase

Apr 10, 2014 4:06 pm ET

April 10 (Bloomberg) -- Gasoline futures pared a weekly gain, slipping from a one-month high, amid speculation that higher prices will attract imports and increase supply.

Prices fell 0.05 cent, the first drop in three days, as brokers in a Bloomberg survey projected that the number of tankers carrying oil products from Europe to the U.S. will rise 40 percent in the next two weeks. Traders may opt to buy and ship fuel to the U.S. when the price differential, or arbitrage, between the regions makes it profitable.

“The rally in RBOB, you could argue, opens up the arb and more gasoline from Europe would come in,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

May-delivery gasoline declined to $3.0079 a gallon on the New York Mercantile Exchange after settling yesterday at the highest price since March 3. Volume was 30 percent above the 100-day average as of 3:33 p.m.

May gasoline’s premium to the June contract widened 0.32 cent to 3.25 cents, the widest spread between the front- and second-month contracts based on settlement prices since Oct. 31.

The premium of front-month U.S. gasoline, or RBOB, to Eurobob gasoline was 9.05 cents, according to data from PVM Oil Associates.

A total of 21 tanker charters are expected for the Rotterdam-to-New York voyage in the next two weeks, a Bloomberg survey of five shipbrokers shows. That compares with 15 charters arranged or expected in last week’s survey.

Fuel Supplies

The Energy Information Administration reported that inventories fell 5.19 million barrels to 210.4 million last week. Supplies were the lowest since Nov. 15, down 9.8 percent in seven weeks of contractions, as refiners performed seasonal maintenance and sold stocks of winter-grade gasoline.

“We’ve experienced a significant inventory draw the last several weeks to a point where inventories are 5 percent lower than this time last year,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Demand rose 3.3 percent last week and over four weeks was 4.4 percent above a year earlier.

“Demand does seem to be improving, but we need to see more evidence before taking RBOB up another level,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Crack Spreads

May gasoline’s crack spread versus May West Texas Intermediate crude increased 18 cents to $22.93 a barrel, based on settlement prices. Gasoline’s premium to European benchmark Brent gained 50 cents to $18.87 a barrel.

The average U.S. pump price rose 1.1 cents to $3.612, the highest since Aug. 4, according to data from Heathrow, Florida- based AAA.

Ultra low sulfur diesel for May delivery fell 1.5 cents, or 0.5 percent, to settle at $2.939 a gallon on volume that was 32 percent below the 100-day average.

Diesel’s crack spread versus WTI narrowed 43 cents to $20.04. The premium to Brent fell 11 cents to $15.98.

--With assistance from Naomi Christie in London.