Gasoline Tumbles as US Refineries Return to Service

Gasoline futures tumbled 4.2% Wednesday as increasing activity by refineries has investors betting on a jump in fuel supplies.

U.S. oil refineries last week boosted operations to the highest levels since early January, according to government data released Wednesday. Operations increased by 0.6 percentage point to 86.3% of capacity, a sharper rise than analysts and traders were expecting, as many refineries got back to churning out gasoline and other fuels after shutting down for maintenance and repairs earlier this year.

While gasoline stockpiles posted a modest decline last week, according to data from the U.S. Energy Information Administration, analysts and traders say that supplies are set to increase over the coming weeks as gasoline wholesalers prepare for higher fuel usage during the summer months. And with demand from drivers still muted, forecasters are expecting stockpiles to climb.

Already, an improving supply outlook is helping to lower prices at the pump. The average U.S. price of regular retail gasoline stood at $3.640 a gallon Wednesday, according to AAA's Daily Fuel Gauge Report, down nearly 11 cents from a month ago.

"Once these refineries start to come back online, the perception is that we'll be able to increase the amount of gasoline heading into the market," said Stephen Schork, head of oil-trading advisory Schork Group. He added that gasoline's price drop is also weighing on oil futures, which fell 2.8% Wednesday.

Front-month May reformulated gasoline blendstock, or RBOB, settled 12.68 cents lower Wednesday at $2.9140 a gallon, the first time prices have fallen under $3 since February.

Light, sweet crude for May delivery also ended lower, declining $2.74, or 2.8%, to $94.45 a barrel on the New York Mercantile Exchange. Brent crude on the ICE futures exchange fell 3.2% to $107.11 a gallon, the lowest settlement this year.

Oil prices were pulled down by gasoline's decline, as well as data that showed rising oil supplies. The EIA said domestic oil stockpiles rose to 388.6 million barrels last week, the highest level since 1990.

Crude-oil prices are a key factor in what consumers pay for gasoline, and despite a slight rise from earlier this year, U.S. futures remain below highs near $98 a barrel hit in January.

On Wednesday, analysts at Barclays slashed their oil-price forecasts for 2013, citing a lower threat of Middle East conflict and improving production in the North Sea, U.S. and other areas.

The bank now expects Nymex-traded West Texas Intermediate crude oil will average $95 a barrel this year, down from an earlier forecast of $108 a barrel. Europe's Brent crude is now seen at an average of $112 a barrel in 2013, down from $125 a barrel in Barclays's earlier forecast.

Lower oil prices amid rising U.S. production should help keep a lid on gasoline as well, said Andy Lipow, president of energy-consulting firm Lipow Oil Associates, in Houston.

"Given the fact that gasoline demand continues to decline...and the fact that we're processing more domestic crude-oil, it's going to make for a better a supply situation," Mr. Lipow said.

May heating oil settled 2.8% lower at $3.0020 a gallon.

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API Addresses Record-High Gasoline Prices

American Petroleum Institute (API) held a press conference Tuesday addressing high gasoline prices and noted that more crude oil production and efficient consumption of oil products are key to addressing higher gasoline prices, API's Chief Economist John Felmy told reporters.

"We have very large oil resources here in the United States and technologies that are making more of them accessible and economic to produce," he said. "Given reasonable regulations, expanded access to resources on federal lands and waters, and fair tax policy, we can bring several million more barrels per day of crude oil to market. It could create more than one million new jobs, reduce our dependence on foreign energy, and increase revenue to the government by billions of dollars a year."

API reported that as of last week, the average U.S. retail price for regular gasoline was $3.78, about 56 cents per gallon higher than two months ago. Crude oil prices are largely set on international exchanges which are determined by global supply and demand. Crude oil prices increased $12 a barrel, or 29 cents per gallon, between December and February, stated API. During that same period, the price of gasoline increased.

Due to a strong demand for world supplies, crude oil prices have increased. There's more optimism about the global economy, which is growing faster and demanding more oil, according to the Energy Information Administration's short-term outlook. However, crude supplies fail to keep up with the demand. In January, domestic crude oil production went above 7 million barrels of oil per day in the United States for the first time in more than 20 years but international production has been less robust, API stated.

"We have not done a good job of expanding opportunities for domestic oil and gas development in federal areas," he said. "The vast majority of the nation's offshore oil resources continue to be off limits."

The organization also stated that if the United States approves the Keystone XL pipeline, the increase in capacity for bringing Canadian oil into the United States would encourage more production into Canada's rich oil sands region. API also reiterated that if supply is increased, than demand is reduced.

"With gasoline prices already approaching $4.00 per gallon and projected to reach all-time record highs during the upcoming driving season, the economy continuing to struggle and unemployment rates refusing to come down, developing domestic energy resources is more important now than ever," said Michael Whatley, executive vice president of Consumer Energy Alliance, to Rigzone.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

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Gasoline Futures Slump as Northeast Supply Worries Ease

Gasoline futures prices tumbled 4.2% Wednesday to a one-month low, a hopeful sign for drivers, after data from the U.S. Energy Information Administration offered an improving outlook for domestic fuel supplies.

Government data released Wednesday showed that refineries are returning to their work of churning out fuel after a period of maintenance work, raising oil processing by 335,000 barrels a day last week. The increasing activity helped push gasoline stockpiles higher in the key Northeast region, where refinery shutdowns over the past year have raised concerns about shortages.

Hit by Hurricane Sandy, gasoline stocks in the Northeast had dropped to as much as 19.3% below year-earlier levels at the end of November, sending futures higher and raising prices at the pump. Now, they are bouncing back. Gasoline stocks in the region are at the highest level since last March and have gained 35% since mid-December.

Gasoline futures have fallen over 7% this week and the surge in retail prices over the past month is slowing, which has some analysts expecting lower prices for drivers. Retail U.S. gasoline prices averaged $3.786 a gallon Wednesday, according to AAA's daily Fuel Gauge Report, up just 0.4 cent from Tuesday. A month ago, gasoline averaged $3.349 a gallon.

"The product is now getting to the market," said Stephen Schork, head of energy-consultancy Schork Group. "Prices at the retail level should start to moderate."

March-delivery reformulated-blendstock for oxygenate blending, or RBOB, futures fell 12.51 cents to settle at $2.8565 a gallon on the New York Mercantile Exchange in the largest one-day percentage decline since December, 2011.

March-delivery gasoline meets the winter-grade fuel standard, while April gasoline must meet a cleaner-burning summer-grade standard. Gasoline futures for April delivery settled 2.9% lower Wednesday at $3.1063 a gallon.

Crude-oil futures finished with slight gains, settling 13 cents higher at $92.76 a barrel on the Nymex. ICE Brent crude futures settled 84 cents, or 0.8%, lower at $111.99 a barrel.

The EIA reported crude-oil stocks rose last week by 1.13 million barrels, less than an anticipated rise of 2.5 million barrels. And increasing refinery operations could signal rising demand for crude to turn into gasoline and other fuels. Still, stocks at 377.5 million barrels are the highest since last July and are the most on record for this time of year since EIA data began in 1982.

The sharp increase in gasoline futures over the past month also contributed to this week's steep decline, according to market watchers. Indications of strong regional supplies just ahead of Thursday's expiration of the March gasoline-futures contract helped spurred the dramatic skid.

"We're seeing more pullback after huge advances," said Kyle Cooper, managing partner at IAF Advisors in Houston.

March heating-oil futures settled 4.38 cents, or 1.4%, lower at $2.9879 a gallon.

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API Addresses Record-High Gasoline Prices

American Petroleum Institute (API) held a press conference Tuesday addressing high gasoline prices and noted that more crude oil production and efficient consumption of oil products are key to addressing higher gasoline prices, API's Chief Economist John Felmy told reporters.

"We have very large oil resources here in the United States and technologies that are making more of them accessible and economic to produce," he said. "Given reasonable regulations, expanded access to resources on federal lands and waters, and fair tax policy, we can bring several million more barrels per day of crude oil to market. It could create more than one million new jobs, reduce our dependence on foreign energy, and increase revenue to the government by billions of dollars a year."

API reported that as of last week, the average U.S. retail price for regular gasoline was $3.78, about 56 cents per gallon higher than two months ago. Crude oil prices are largely set on international exchanges which are determined by global supply and demand. Crude oil prices increased $12 a barrel, or 29 cents per gallon, between December and February, stated API. During that same period, the price of gasoline increased.

Due to a strong demand for world supplies, crude oil prices have increased. There's more optimism about the global economy, which is growing faster and demanding more oil, according to the Energy Information Administration's short-term outlook. However, crude supplies fail to keep up with the demand. In January, domestic crude oil production went above 7 million barrels of oil per day in the United States for the first time in more than 20 years but international production has been less robust, API stated.

"We have not done a good job of expanding opportunities for domestic oil and gas development in federal areas," he said. "The vast majority of the nation's offshore oil resources continue to be off limits."

The organization also stated that if the United States approves the Keystone XL pipeline, the increase in capacity for bringing Canadian oil into the United States would encourage more production into Canada's rich oil sands region. API also reiterated that if supply is increased, than demand is reduced.

"With gasoline prices already approaching $4.00 per gallon and projected to reach all-time record highs during the upcoming driving season, the economy continuing to struggle and unemployment rates refusing to come down, developing domestic energy resources is more important now than ever," said Michael Whatley, executive vice president of Consumer Energy Alliance, to Rigzone.

With more than 10 years of journalism experience, Robin Dupre specializes in the offshore sector of the oil and gas industry. Email Robin at rdupre@rigzone.com.

Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.

View the original article here

Gasoline Futures Slump as Northeast Supply Worries Ease

Gasoline futures prices tumbled 4.2% Wednesday to a one-month low, a hopeful sign for drivers, after data from the U.S. Energy Information Administration offered an improving outlook for domestic fuel supplies.

Government data released Wednesday showed that refineries are returning to their work of churning out fuel after a period of maintenance work, raising oil processing by 335,000 barrels a day last week. The increasing activity helped push gasoline stockpiles higher in the key Northeast region, where refinery shutdowns over the past year have raised concerns about shortages.

Hit by Hurricane Sandy, gasoline stocks in the Northeast had dropped to as much as 19.3% below year-earlier levels at the end of November, sending futures higher and raising prices at the pump. Now, they are bouncing back. Gasoline stocks in the region are at the highest level since last March and have gained 35% since mid-December.

Gasoline futures have fallen over 7% this week and the surge in retail prices over the past month is slowing, which has some analysts expecting lower prices for drivers. Retail U.S. gasoline prices averaged $3.786 a gallon Wednesday, according to AAA's daily Fuel Gauge Report, up just 0.4 cent from Tuesday. A month ago, gasoline averaged $3.349 a gallon.

"The product is now getting to the market," said Stephen Schork, head of energy-consultancy Schork Group. "Prices at the retail level should start to moderate."

March-delivery reformulated-blendstock for oxygenate blending, or RBOB, futures fell 12.51 cents to settle at $2.8565 a gallon on the New York Mercantile Exchange in the largest one-day percentage decline since December, 2011.

March-delivery gasoline meets the winter-grade fuel standard, while April gasoline must meet a cleaner-burning summer-grade standard. Gasoline futures for April delivery settled 2.9% lower Wednesday at $3.1063 a gallon.

Crude-oil futures finished with slight gains, settling 13 cents higher at $92.76 a barrel on the Nymex. ICE Brent crude futures settled 84 cents, or 0.8%, lower at $111.99 a barrel.

The EIA reported crude-oil stocks rose last week by 1.13 million barrels, less than an anticipated rise of 2.5 million barrels. And increasing refinery operations could signal rising demand for crude to turn into gasoline and other fuels. Still, stocks at 377.5 million barrels are the highest since last July and are the most on record for this time of year since EIA data began in 1982.

The sharp increase in gasoline futures over the past month also contributed to this week's steep decline, according to market watchers. Indications of strong regional supplies just ahead of Thursday's expiration of the March gasoline-futures contract helped spurred the dramatic skid.

"We're seeing more pullback after huge advances," said Kyle Cooper, managing partner at IAF Advisors in Houston.

March heating-oil futures settled 4.38 cents, or 1.4%, lower at $2.9879 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Crude Settles Up; Gasoline Stronger Ahead of U.S. Data

Crude-oil futures prices settled higher Tuesday, while gasoline and heating oil prices were stronger on anticipation of tightening supplies.

Prices had stumbled Monday in a broad selloff that handed equities their first triple-digit loss of the year and swept through commodities markets. After oil's biggest fall in a month, the 1.6% loss Monday was seen as a buying opportunity, analysts said.

U.S. benchmark crude prices were pulled higher by strength in prices of refined products. Inventories of gasoline and distillate fuel [heating oil/diesel] are unusually low in the Northeast and are expected to tighten further as refiners reduce operations due to seasonal maintenance work on facilities.

"The market has a momentum of its own," said Gene McGillian, broker and analyst at Tradition Energy. "The rally is starting up again" on hopes of improving economic growth which will spur a rise in oil demand, he said.

"The fundamentals are the weak spot, but this market doesn't seem to want to trade down," Mr. McGillian said, adding that gains in demand will need to be apparent soon to sustain gains.

Monday's "hard selloff was simply a correction in a bull market that has yet to fully run its course," said Jim Ritterbusch, president of Ritterbusch & Associates, an advisory firm.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled 47 cents higher at $96.64 a barrel. ICE North Sea Brent crude oil settled 92 cents higher at $116.52 a barrel. Brent's premium to Nymex widened $19.88 a barrel, the highest level since Dec. 27.

Mr. Ritterbusch said Brent's premium to the U.S. benchmark continues to stretch because of snags on the Seaway pipeline, rather any fundamental tightness in Brent supplies.

Brent's premium to the U.S. benchmark price had been shrinking in recent weeks on the expectation that refiners in the U.S. Gulf region would need less imported crude oil of similar quality to Brent as the Seaway pipeline increased flows from the Midwest into the key refining hub. But operational problems have limited the volumes moving on the pipeline, allowing Brent to recover at the expense of the U.S. benchmark.

Analysts noted that Saudi Arabia, the world's biggest oil exporter, has scaled back its oil output by about 700,000 barrels a day since November and pumped just over 9 million barrels a day. That came amid forecasts that the world will need less oil from the Saudis and others in the Organization of the Petroleum Exporting Countries, as output from producers outside the group, led by the U.S., continues to grow.

Because of strong, persistent gains in Brent, "we feel that odds are high of some gradual uplift in Saudi production designed to restrict additional crude price gains," Mr. Ritterbusch said. Brent had topped $117 a barrel earlier Tuesday, a settlement at that level would be the highest since May 2012.

Analysts said the market is expected to take its near-term cues from the weekly U.S. oil inventory data.

A Dow Jones Newswires survey shows analysts expect data to show U.S. crude oil inventories rose by 2.9 million barrels in the week ended Friday while refiners trimmed operations relative to capacity by 0.1 percentage point.

Gasoline stocks are expected to rise by 900,000 barrels, while distillate stocks, comprising heating oil and diesel fuel, are expected to drop by 600,000 barrels.

The American Petroleum Institute, a trade group, releases its inventory data for Feb. 1 at 4:30 p.m. EDT Tuesday, while the more widely watched federal figures from the Energy Information Administration are due at 10:30 a.m. EDT Wednesday.

March-delivery heating oil futures settled at a 16-week high, gaining 3.73 cents, or 1.2%, to settle at $3.1913 a gallon.

Front-month reformulated gasoline prices rose 2.59 cents to settle at $3.0374 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Crude Settles Up; Gasoline Stronger Ahead of U.S. Data

Crude-oil futures prices settled higher Tuesday, while gasoline and heating oil prices were stronger on anticipation of tightening supplies.

Prices had stumbled Monday in a broad selloff that handed equities their first triple-digit loss of the year and swept through commodities markets. After oil's biggest fall in a month, the 1.6% loss Monday was seen as a buying opportunity, analysts said.

U.S. benchmark crude prices were pulled higher by strength in prices of refined products. Inventories of gasoline and distillate fuel [heating oil/diesel] are unusually low in the Northeast and are expected to tighten further as refiners reduce operations due to seasonal maintenance work on facilities.

"The market has a momentum of its own," said Gene McGillian, broker and analyst at Tradition Energy. "The rally is starting up again" on hopes of improving economic growth which will spur a rise in oil demand, he said.

"The fundamentals are the weak spot, but this market doesn't seem to want to trade down," Mr. McGillian said, adding that gains in demand will need to be apparent soon to sustain gains.

Monday's "hard selloff was simply a correction in a bull market that has yet to fully run its course," said Jim Ritterbusch, president of Ritterbusch & Associates, an advisory firm.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled 47 cents higher at $96.64 a barrel. ICE North Sea Brent crude oil settled 92 cents higher at $116.52 a barrel. Brent's premium to Nymex widened $19.88 a barrel, the highest level since Dec. 27.

Mr. Ritterbusch said Brent's premium to the U.S. benchmark continues to stretch because of snags on the Seaway pipeline, rather any fundamental tightness in Brent supplies.

Brent's premium to the U.S. benchmark price had been shrinking in recent weeks on the expectation that refiners in the U.S. Gulf region would need less imported crude oil of similar quality to Brent as the Seaway pipeline increased flows from the Midwest into the key refining hub. But operational problems have limited the volumes moving on the pipeline, allowing Brent to recover at the expense of the U.S. benchmark.

Analysts noted that Saudi Arabia, the world's biggest oil exporter, has scaled back its oil output by about 700,000 barrels a day since November and pumped just over 9 million barrels a day. That came amid forecasts that the world will need less oil from the Saudis and others in the Organization of the Petroleum Exporting Countries, as output from producers outside the group, led by the U.S., continues to grow.

Because of strong, persistent gains in Brent, "we feel that odds are high of some gradual uplift in Saudi production designed to restrict additional crude price gains," Mr. Ritterbusch said. Brent had topped $117 a barrel earlier Tuesday, a settlement at that level would be the highest since May 2012.

Analysts said the market is expected to take its near-term cues from the weekly U.S. oil inventory data.

A Dow Jones Newswires survey shows analysts expect data to show U.S. crude oil inventories rose by 2.9 million barrels in the week ended Friday while refiners trimmed operations relative to capacity by 0.1 percentage point.

Gasoline stocks are expected to rise by 900,000 barrels, while distillate stocks, comprising heating oil and diesel fuel, are expected to drop by 600,000 barrels.

The American Petroleum Institute, a trade group, releases its inventory data for Feb. 1 at 4:30 p.m. EDT Tuesday, while the more widely watched federal figures from the Energy Information Administration are due at 10:30 a.m. EDT Wednesday.

March-delivery heating oil futures settled at a 16-week high, gaining 3.73 cents, or 1.2%, to settle at $3.1913 a gallon.

Front-month reformulated gasoline prices rose 2.59 cents to settle at $3.0374 a gallon.

Copyright (c) 2012 Dow Jones & Company, Inc.

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Crude-Oil Futures Climb to 19-Week High; Gasoline Futures Rally for 8th Day

NEW YORK--Crude-oil futures prices posted modest gains Monday, settling at a 19-week high, while concerns over tight mid-Atlantic gasoline supplies pushed futures up for an eighth straight day.

Oil futures climbed early as the Commerce Department said December U.S. durable goods orders rose 4.6% from November, much stronger than the consensus call for a 2% rise. The data is the latest of recent strong indicators of a recovery in the U.S., the world's biggest oil consumer.

But after sluggish data on home sales and weakness in the broader equities market, crude turned down before regaining traction to tick up to a fresh high after failing to hold gains above $96 a barrel in the three prior sessions.

Light, sweet crude oil for March delivery on the New York Mercantile Exchange settled up 56 cents at $96.44 a barrel, but off from its session high of $96.81 a barrel. The modest gain was enough to push crude to its highest settlement since Sept. 18, but traders said the path to further gains may not be smooth.

ICE North Sea Brent for March delivery settled up 20 cents at $113.48 a barrel, the highest price since Oct. 16.

"We've been gaining on signs of an economy recovery," which would spark higher demand for oil, said Carl Larry, president of Oil Outlooks and Opinions. Prospects for more gains are on hold until the market gets a read on U.S. oil inventory data, the view from the Federal Reserve's policy-making board, and the January nonfarm payrolls report.

Mr. Larry said crude oil prices, with the $97-a-barrel level in sight, may be poised to challenge $100 a barrel next week for the first time since May if the payroll report due Friday is supportive and heavy refinery maintenance work doesn't create a glut of crude oil in inventories.

Refiners last week cut crude oil processing rates to a 30-month low and sustained declines are expected.

Traders will be watching U.S. oil inventory data due at midweek to show the scope of inventory gains and refinery operations.

"If we don't get a big crude build, we will be going higher. That's the X factor here. It's all about the refineries," Mr. Larry said. He expects crude oil stocks to rise by 1.75 million barrels, which is at the low end of early forecasts.

Analysts surveyed by Dow Jones Newswires expect crude stocks to rise by 2.5 million barrels, with refinery operations inching up 0.1 percentage point from a 10-month low last week amid what is expected a busy quarter for seasonal maintenance work.

Jim Ritterbusch, president of Ritterbusch & Associates, said he sees crude struggling to hold above $96 in the near term due to reduced refiner demand. He estimated that first-quarter maintenance work could cut crude processing by about 9% to 10% of capacity, compared with a 7% in the first quarter of 2008, a period of heavy shutdowns. That would translate to around 1.6 million to 1.7 million barrels a day of crude capacity off line.

Concerns that refinery maintenance will further tighten gasoline inventories in the heavily populated mid-Atlantic region have thrust reformulated gasoline blendstock futures into the spotlight at a time when gasoline demand is the weakest of the year.

Heavy maintenance is expected to reduce gasoline production and tighten inventories. Gasoline stocks are high nationwide, but in the mid-Atlantic region, which includes the New York Harbor delivery point of the Nymex contract, they are nearly 15% below their five-year average level for this time of year, government data show.

Inventories were slim before Hurricane Sandy disrupted operations at refineries and terminals in the region, and haven't rebounded.

The specter for tighter-still supplies increased on Monday, when Hess Corp. said it will permanently shut its small Port Reading, N.J., refinery by the end of February. Energy Department data show the plant produces 27,000 barrels a day of gasoline, a fraction of the three million barrels a day or so consumed along the entire East Coast. Still, traders said, the closure will increase the need for imports to the region.

Gasoline prices in the mid-Atlantic region are among the highest in the nation, in part because crude imports in the region are tied to the price of internationally traded Brent crude oil, rather than abundant crude oil supplies in the Midwest, which keep prices down.

February-delivery contracts for reformulated gasoline blendstock futures settled 5.94 cents higher, or 2.1%, at $2.9348 a gallon, the highest price since Oct. 11. Prices have rallied 8.4%, or 22.82 cents a gallon, in the past eight sessions. That is the longest string of gains since the summer of 2011.

Gasoline demand is weakest at this time of year and can lag peak summer demand by as much as one million barrels a day.

RBOB for May delivery, so far this month, has averaged nearly 16 cents a gallon more than the February price. That is the highest May-to-February premium in four years, and suggests investors believe gasoline stocks will still be tight as the peak demand season begins.

February heating oil settled down 0.48 cent, at $3.0616 a gallon. The February heating oil and RBOB contracts expire at Thursday's settlement.

Copyright (c) 2012 Dow Jones & Company, Inc.

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