By - May 9, 2011 3:32 PM GMT-0500
Gasoline advanced the most since July 2009 on speculation that fuel production and distribution will be disrupted by Mississippi River flooding and refinery unit shutdowns from the Midwest to the Gulf Coast.
Futures jumped 6.1 percent as Chevron had a crude unit fire in its Mississippi refinery and Exxon Mobil Corp. had a unit failure in its Illinois plant. The Mississippi River, the largest U.S. river system, is forecast to crest today in Memphis, Tennessee, just below its 74-year-old record as a bulge of water moves south toward the riverside refineries in Louisiana.
“There’s strength in the spot market, there was a laundry list of refinery issues over the weekend, and there’s just no refinery selling on the Gulf Coast,” said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas. “There may be concerns about disruptions of incoming crude, concerns about flooding.”
Gasoline for June delivery rose 18.83 cents to settle at $3.2784 a gallon on the New York Mercantile Exchange. It was the first gain in six days and follows a loss of 11 percent last week. Gasoline was the biggest gainer on the Thomson Reuters/Jefferies CRB Index.
Mississippi Flooding
Flooding may disrupt fuel production from plants along the river from New Orleans to Baton Rouge. That area contains 11 refineries with a combined capacity of 2.5 million barrels a day, or 13 percent of U.S. fuel output, said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
“There is potential impact to refinery supplies due to Mississippi River flooding, so gasoline is biased to the upside,” Lipow said. “Supplies, especially in the Northeast, are quite tight.”
Futures were supported by higher spot prices. Regular gasoline in Chicago traded at a 21-cent premium to futures, compared with a 10-cent premium on May 6, according to data compiled by Bloomberg. Gulf Coast gasoline rose 6.25 cents to trade at a 3-cent premium.
“There were spot shortages at some terminals,” said Lewis Adam, president of ADMO Energy LLC, a supply consultant in Kansas City.
Exxon shut a fuel terminal in Memphis April 29 in advance of flooding, Kevin Allexon, a company spokesman, said in an e- mail. “Severe weather” forced Valero Energy Corp. to cut off sales to unbranded spot customers in Paducah, Kentucky, Bill Day, a spokesman for Valero in San Antonio, said. “We will meet obligations to our branded customers,” he said.
Supply Drop
Futures also surged on speculation prices fell too far last week with supplies at a 22-month low before the summer driving season. Gasoline stockpiles dropped 11 consecutive weeks from Feb. 11 to April 29, according to Energy Department data, and shed 36.6 million barrels. Refiners operated at 82.8 percent of capacity, 6.8 percentage points below a year earlier.
“Last week’s drop was a little overdone,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Until we see signs that refineries are going to start ramping up production for the summer, gasoline will have a bit of a bid in it.”
The premium of June futures over July increased to 11.4 cents a gallon from 9.45 cents on May 6, the widest backwardation for the contracts nearest to expiration since Aug. 31, 2009. Supplies in Padd 1 are the lowest since October 2008, according to Energy Department data. The region includes New York Harbor, the delivery point of the Nymex gasoline contract.
Supply Survey
Supplies of the motor fuel probably fell 750,000 barrels last week to 203.9 million barrels, the lowest level since June 2009, according to the median estimate of 11 analysts in a survey by Bloomberg News. Supply disruptions that occurred after May 6 would not be reflected in department’s report, to be released on May 11.
Gasoline use typically climbs in mid-year when summer vacations boost consumption. The peak demand period starts after the Memorial Day holiday in late May and ends on Labor Day in early September. The holidays fall on May 30 and Sept. 5 this year.
The premium of gasoline over crude oil on Nymex gained $2.54 to $35.14 a barrel. That’s the largest crack spread for the contract nearest to expiration since May 2007.
“It’s the supply issues, ahead of the Memorial Day weekend,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “People are thinking there could be supply issues going into the summer.”
Regular retail gasoline fell 0.6 cent to $3.96 a gallon yesterday, AAA said on its website.
Volume for gasoline futures was 173,895 contracts in electronic trading as of 3:06 p.m., 45 percent above the average over the past three months. Heating oil volume was 128,481 lots, 4.5 percent above the average.
Heating oil for June delivery rose 11.61 cents, or 4.1 percent, to settle at $2.9618 a gallon on the exchange.
Source:
Comments
Post a Comment