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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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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Origin Prepares to Axe 350 Jobs by end-2013 amid Profit Slump

Origin Energy is preparing to cut 350 jobs by the end of this year in an attempt to contain costs, as a new forecast by the company shows that expected developmental spending for the Australian Pacific LNG (APLNG) will be $25.3 billion (AUD 24.7 billion), up $2 billion from its estimate released in July last year.

Origin noted that it has already cut 500 jobs in 2H 2012, and that by the end of the company's restructuring process, 850 jobs will be eliminated. A spokesperson told Rigzone Thursday that of the 500 jobs axed, around 370 of those were from Origin's energy markets business.

The company posted Thursday a net profit of $555 million (AUD 542 million) for the half-year ended Dec. 31, down 34 percent from $813 million (AUD 794 million) a year ago. Underlying profit for the same period was at $371 million (AUD 362 million), down 26 percent from $501 million (AUD 489 million) a year ago.

"The first half of the financial year was characterized by more challenging operating conditions in the energy markets segment, which impacted profit and cash flow," Origin's Chairman Kevin McCann, said in a statement.

"As Origin's existing business matures, it is important that we improve our operational effectiveness. We are focused on lowering our cost base, meeting competition more effectively and maximizing cash flow from our existing business. We [will] also continue to review our activities and close, discontinue or divest non-core assets, which will improve our available cash flow in the short to medium term," McCann added.

Origin disclosed Thursday that the APLNG coal seam gas to liquefied natural gas (LNG) project is progressing, with the upstream component of the project 29 percent complete and the downstream component 31 percent complete.

"Gathering locations for more than 960 wells – approximately 90 percent of wells required – have been scouted. Installation of gathering flow lines and electrical and fiber optic cables started in the second quarter of the 2013 financial year," Origin said in a separate statement addressing APLNG's progress.

"Construction of the first gas processing plant at Condabri Central Gas Plant was 60 percent complete in December last year and remains on track to be mechanically complete in mid-2013. Construction of the Condabri South and North gas processing facilities are also progressing to plan. The main pipeline is on track to be complete in early 2014. The Narrows Crossing, which is being executed by QCLNG, is progressing largely in accordance with its revised plan," Origin added.

The first 4.5 million tonnes per annum (mtpa) train will produce its first LNG cargo by mid-2015, while its second 4.5 mtpa train will be started up in 4Q 2015.

Quintella has reported on the upstream and downstream oil and petrochemicals markets from 2004. Email Quintella at quintella.koh@rigzone.com.

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