Gasoline Declines From Two-Week High on Rising Fuel Production

May 15, 2014 4:32 pm ET

May 15 (Bloomberg) -- Gasoline futures fell from a two-week high on speculation that ample crude supplies and healthy margins will entice refiners to increase production.

Futures slipped 0.2 percent. Inventories along the Gulf Coast, known as PADD 3, grew 2.33 million barrels last week to 215.7 million, the most in Energy Information Administration data going back to 1990. The profit from turning Light Louisiana Sweet oil in the Gulf Coast into gasoline and diesel is 43 percent above a year ago, according to data compiled by Bloomberg.

“Crude oil inventories in the U.S. built again especially on the Gulf Coast, where refineries will be ending their spring maintenance and producing more products,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

June-delivery gasoline fell 0.51 cent to $2.9642 a gallon on the New York Mercantile Exchange, after settling yesterday at the highest level since April 30. It was the first drop in four days.

West Texas Intermediate crude for June delivery fell 87 cents to $101.50 a barrel on the Nymex.

“We’re also being dragged down by WTI,” Lipow said.

Gasoline demand increased 5.4 percent last week to 9.19 million barrels a day, and over the past four weeks was 3.2 percent above a year earlier. At the same time, gasoline production jumped 6.8 percent last week to 9.61 million barrels a day, the most since the week ended Dec. 20.

‘Huge’ Production

“You had a huge production number for gasoline last week,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Demand was great but that was only one week. The trend is going to be toward higher production and it’s unclear if demand is going to be high enough to suck up that added production.”

Gasoline’s crack spread versus WTI crude widened 66 cents to $23 a barrel. The motor fuel’s premium to Brent, the European benchmark, dropped 46 cents to $14.06.

The 3-2-1 crack spread, measuring the difference between 3 barrels of LLS crude versus 2 barrels of gasoline and 1 of diesel, was down 21 cents to $14.19 a barrel at 4:02 p.m., compared with $10.43 a year ago.

The average U.S. pump price rose 0.1 cent to $3.641 a gallon, according to data from Heathrow, Florida-based AAA. Prices are 5.3 cents higher than a year ago.

Ultra low sulfur diesel for June delivery fell 1.2 cents, or 0.4 percent, to settle at $2.9506, the first decline this week.

Diesel’s crack spread versus WTI crude climbed 37 cents to $22.43 a barrel while the motor fuel’s premium to Brent crude narrowed 75 cents to $13.49.