(For Bloomberg fair value curves, see CFVL <GO>.)
Aug. 6 (Bloomberg) -- Gasoline gained and crude oil slipped to a six-month low as refineries slowed their operations, pushing gasoline inventories down by the most in four months.
The motor fuel’s rally widened the profit refineries make from processing a barrel of crude into the fuel. Plants cut their operating rate by the most since June, the Energy Information Administration said. Gasoline stockpiles decreased 4.39 million barrels and demand over four weeks reached the highest since June 13. Distillate supplies slipped for the first time in 10 weeks.
“There is a very significant drop in gasoline stocks,” said James Williams, an economist at WTRG Economics, an energy- research firm in London, Arkansas. “The report is bullish for products but not as much for crude oil. Who wants to vote for crude when refinery runs are coming down?”
Gasoline for September delivery climbed 2.42 cents, or 0.9 percent, to $2.7397 a gallon on the New York Mercantile Exchange, the biggest one-day gain since July 25. The volume of all futures traded was 16 percent above the 100-day average.
West Texas Intermediate crude declined 46 cents, or 0.5 percent, to $96.92 a barrel on the Nymex, the lowest settlement since Feb. 3. Trading was 7.4 percent above the 100-day average at the 2:30 p.m. floor closing.
Gasoline’s gain widened the crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, to $18.15 a barrel from $16.67 yesterday. It settled at $16.08 on July 24, the lowest since February.
“The drawdown in refinery products is impressive and definitely supportive,” said John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy. “Demand for gasoline is strong. It’s a turnaround of the overall situation.”
U.S. refineries operated at 92.4 percent of their capacity last week, down 1.1 percentage points from the previous week.
Gasoline inventories fell to 213.8 million barrels in the week ended Aug. 1, the EIA, the Energy Department’s statistical arm, said. They reached 218.2 million the previous week, the most since March. Consumption in the four weeks ended Aug. 1 rose to 9.05 million barrels a day.
“The most important thing is gasoline demand,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The draw is because demand is higher. The margin is coming back.”
Inventories at Cushing, Oklahoma, the delivery point for WTI futures on the Nymex, increased for the first time in a month, up 83,000 barrels to 18 million. A July 29 fire forced the shutdown of CVR Energy Inc.’s refinery in Coffeyville, Kansas, which uses supplies from Cushing. The 115,000-barrel-a- day refinery may be shut for four weeks, Chief Executive Officer Jack Lipinski said July 31.
“This was certainly a bullish report,” said Jim Russell, who helps oversee $124 billion as a senior equity strategist at U.S. Bank Wealth Management in Cincinnati. “There was a refinery outage in the central U.S., which helps explain the big drop in gasoline supply. This is temporary but still having an impact on the market.”
Distillate fuels, including diesel and heating oil, decreased 1.8 million barrels to 124.9 million. Crude supplies dropped 1.76 million to 365.6 million.
“Refinery problems near Cushing are going to have an impact on supplies there,” said Phil Flynn, senior market analyst at the Price Futures Group in Chicago. “Gasoline demand was a lot stronger than in recent weeks, which is sending prices higher.”
Brent for September settlement slid 2 cents to $104.59 a barrel on the London-based ICE Futures Europe exchange, the lowest since Nov. 7, as Israel withdrew troops from Gaza and negotiators sought a more lasting halt to the offensive. The European benchmark crude was at a premium of $7.67 to WTI, up from $7.23 yesterday.
“The truce in Gaza means that one Middle East flashpoint has calmed down,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We’ve been seeing the geopolitical premium decline for a while now.”