Gasoline Declines Most in Seven Weeks After U.S. Sues Goldman

April 16, 2010, 5:12 PM EDT

By Barbara Powell

April 16  -- Gasoline fell more than 2 percent after Goldman Sachs Group Inc. was sued by U.S. regulators for fraud, sending stocks lower and adding to concern that the economic recovery will slow.

Gasoline slipped the most in seven weeks as U.S. stocks widened losses after the Securities and Exchange Commission accused Goldman Sachs of defrauding investors by misstating and omitting key facts about a financial product tied to subprime mortgages. Gasoline dropped earlier as the Reuters/University of Michigan preliminary April consumer sentiment index fell to 69.5 from a reading of 73.6 in March.

“Just when the market is getting confident, the rug can be pulled out so easily,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “What are the implications of the Goldman news? Investors don’t like uncertainty going into the weekend.”

Gasoline for May delivery fell 4.92 cents, or 2.1 percent, to settle at $2.277 a gallon on the New York Mercantile Exchange, the largest decline since Feb. 25. Prices lost 0.5 percent this week after falling 1.5 percent last week.

The Standard & Poor’s 500 Index and the MSCI World Index lost the most since Feb. 4, with each falling 1.5 percent at 3:15 p.m. in New York. Crude oil for May delivery lost 2.7 percent to settle at $83.24 on the exchange.

“We’re not seeing a strong enough recovery in the U.S. for people to be comfortable with prices at these levels,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago, a division of MF Global Inc.

Consumer Confidence

Futures fell yesterday as the Labor Department reported that initial jobless claims rose by 24,000 to 484,000 in the week ended April 10, the most since Feb. 20.

“We have too many people without jobs, and we have rallied way too high for the demand that we have,” said Gordon Elliott, a risk management specialist at FC Stone LLC in St. Louis Park, Minnesota.

Stockpiles of the motor fuel were 4.7 percent above the five-year average for the period in the week ended April 9, according to the Energy Department.

Surplus Capacity

The department projected today in a report that refiners will have surplus available capacity through June because of lower fuel demand and increased use of ethanol in gasoline. The report said “relatively high inventories and extra import potential” make it unlikely there would be “significant price impacts” due to planned refinery shutdowns for repairs.

Refinery crude distillation capacity could run as much as 13 percent more than needed to meet demand through June and available catalytic cracking capacity could run as much as 10 percent more than needed, according to the report.

Gasoline also slipped a second day as the dollar gained 0.5 percent versus the euro, weakening the investment appeal of commodities.

“The dollar has got a little firmness in it and we appear to have plenty of everything,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas. “And the contangos are widening on heating oil, gasoline and crude so it’s difficult to trade higher on an absolute price basis.”

Spread Widens

The spread between the May contract and the June contract widened to 1.69 cents from 1.31 cents. The premium of gasoline over heating oil narrowed to 6.01 cents from 7.39 cents.

The crack spread, or the difference between gasoline and crude oil, based on May contracts, widened about 20 cents to $12.39 a barrel.

Regular gasoline at the pump, averaged nationwide, rose 0.4 cent to $2.862 a gallon, AAA, the nation’s biggest motoring organization, said today on its Web site.

The department’s report today said that “since a slow economic recovery is expected, distillate demand is not projected to recover quickly.” Demand for distillates, which includes heating oil and diesel, was the lowest since Jan. 1 in the week ended April 9, according to the department.

Heating oil for May delivery lost 3.63 cents, or 1.6 percent, to settle at $2.2169 a gallon on the exchange, down 0.4 percent for the week. The heating oil crack spread, based on May contracts, widened about 78 cents to $9.87 a barrel.

Source: http://www.businessweek.com/news/2010-04-16/gasoline-loses-more-than-3-as-goldman-sued-by-sec-stocks-fall.html