Gasoline Futures Advance as Higher Demand Reduces Fuel Supplies

May 16, 2014 6:07 pm ET

May 16 (Bloomberg) -- Gasoline futures rose, capping the first weekly increase in three, as inventories dropped and demand picked up as summer driving season approaches.

Prices gained 0.3 percent. Supplies of the motor fuel along the Gulf Coast slipped 538,000 barrels to 74.2 million in the week ended May 9. Consumption over the past four weeks was 3.2 percent above a year earlier. Volume was 109,144 contracts, compared with an average of 151,000 over the past 15 sessions.

“It’s quieter than it has been, in all products,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “They were supported by declines in product inventories this week as we head into the Memorial Day holiday next weekend.”

June-delivery gasoline rose 0.93 cent to settle at $2.9735 a gallon on the New York Mercantile Exchange. Prices climbed 2.7 percent this week.

Futures also rose as Brent crude climbed amid speculation that escalating tension in Ukraine may disrupt supplies from Russia, the world’s biggest energy exporter.

NATO Secretary General Anders Fogh Rasmussen said President Vladimir Putin’s assurances that Russia has no plans to intervene further in Ukraine can’t be believed, amid continued unrest in the run-up to the May 25 presidential election.

Brent for July settlement climbed 66 cents to $109.75 a barrel. The June contract gained 25 cents yesterday to expire at a $1.35 premium to July.

Stronger Brent

“Today I think we’re reflecting the Brent market,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Expiring June Brent yesterday was much stronger than what anybody had thought.”

Gasoline’s crack spread versus WTI crude narrowed 13 cents to $22.87 a barrel. The motor fuel’s premium to Brent, the European benchmark, fell 23 cents to $14.38.

The average U.S. pump price rose 0.7 cent to $3.648 a gallon, according to data from Heathrow, Florida-based AAA. Prices are 4.7 cents higher than a year ago.

Ultra low sulfur diesel for June delivery gained 0.3 cent to $2.9536 a gallon on the exchange. Prices climbed 1.6 percent this week.

Diesel’s crack spread versus WTI crude narrowed 39 cents to $22.03 a barrel, while the motor fuel’s premium to Brent crude narrowed 52 cents to $14.09.

--With assistance from Barbara Powell in Houston.