Gasoline Rises to 2-Week High as Supply Drops Amid Higher Demand

May 14, 2014 4:27 pm ET

May 14 (Bloomberg) -- Gasoline futures climbed to a two- week high as supplies dropped and demand grew ahead of the summer driving season.

Prices advanced 1.3 percent. Stockpiles slipped 772,000 barrels to 212.4 million, Energy Information Administration data show. A survey by Bloomberg projected a gain of 300,000 barrels. Demand jumped to the highest level since November. West Texas Intermediate crude reached a three-week high after supplies fell at Cushing, Oklahoma, the delivery point for the futures contract.

“Inventories did fall, a pickup in demand helps and the products are being dragged up by crude,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

June-delivery gasoline rose 3.91 cents to $2.9693 a gallon on the New York Mercantile Exchange, the highest settlement since April 30.

Inventories fell as refinery utilization dropped 1.4 percentage points to 88.8 percent.

“That low run rate underpins the price and today was a reminder that good demand is the seasonal leader,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy.

Inventories of reformulated gasoline blendstock for oxygen blending in PADD 1 fell 794,000 barrels to 15.1 million, the lowest level in 16 months. PADD 1 includes New York Harbor, delivery point for the Nymex contract.

New York

“Inventories drew in New York Harbor and that in particular has rallied gasoline prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Demand increased 5.4 percent to 9.19 million barrels a day, and over the past four weeks was 3.2 percent above a year earlier.

Consumption traditionally rises as the U.S. nears the summer driving season that starts on Memorial Day, which this year falls on May 26. Prices at the pump are the lowest in a month, according to AAA.

“This rebound in gasoline prices is because of where we are, leading into the Memorial Day weekend and the expectation of a further pickup in demand,” McGillian said.

Gasoline’s crack spread versus WTI crude widened 97 cents to $22.34 a barrel. The motor fuel’s premium to Brent, the European benchmark, gained 69 cents to $14.52.

Pump Prices

The average U.S. pump price fell 0.4 cent to $3.64 a gallon, the 16th consecutive decline, according to data from Heathrow, Florida-based AAA. Prices are 5.8 cents higher than a year ago.

Ultra low sulfur diesel for June delivery rose 1.86 cents, or 0.6 percent, to $2.9626 a gallon, the highest settlement since April 29.

Supplies of distillates, including diesel and heating oil, fell 1.12 million barrels to 112.9 million, EIA data show. The survey projected an increase of 500,000 barrels. Distillate demand declined 1.3 percent to 4.27 million barrels a day.

Diesel’s crack spread versus WTI crude climbed 11 cents to $22.06 a barrel while the motor fuel’s premium to Brent crude narrowed 17 cents to $14.24.