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Gasoline rises, crude falls as US refiners cut rates

08.06.2014  | 

Gasoline headed for the biggest one-day gain since June, widening the profit refineries make from processing a barrel of crude into the fuel. Plants cut their operating rate by the most since June.

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By MOMING ZHOU and MARK SHENK
Bloomberg

Gasoline futures rallied while crude oil slipped to a six-month low as refineries slowed their operations, pushing gasoline inventories down by the most in four months.

Gasoline headed for the biggest one-day gain since June, widening 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 bbl last week, the most since April, and consumption over four weeks increased to the highest level since June 13.

“The drawdown in refinery products is impressive and definitely supportive,” said John Kilduff, a partner at Again Capital, a New York-based hedge fund that focuses on energy. “Demand for gasoline is strong. It’s a turnaround of the overall situation.”

Gasoline for September delivery climbed 3.24 cents, or 1.2%, to $2.7479/gal at 1:57 p.m. on the New York Mercantile Exchange after sinking to $2.7155 on Tuesday. The volume of all futures traded was 19% above the 100-day average.

West Texas Intermediate crude declined 50 cents, or 0.5%, to $96.88/bbl on the Nymex after reaching $96.86, the lowest since Feb. 4. Trading was 3.8% above the 100- day average.

Gasoline’s gain widened the crack spread, a rough measure of the profit from processing a barrel of oil into gasoline, to $18.69/bbl from $16.67 on Tuesday. It settled at $16.08 on July 24, the lowest since February.

Gasoline Inventories

US refineries operated at 92.4% of their capacity last week, down 1.1 percentage points from 93.5% the previous week.

Gasoline inventories fell to 213.8 million bbl 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 bpd.

“The most important thing is gasoline demand,” said Carl Larry, president of Oil Outlooks & Opinions 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 bbl to 18 million. A July 29 fire forced the shutdown of CVR Energy's refinery in Coffeyville, Kansas, which uses supplies from Cushing. The 115,000-bpd refinery may be shut for four weeks, CEO Jack Lipinski said July 31.

Refinery Rate

“This was certainly a bullish report,” said Jim Russell, who helps oversee $124 billion as a senior equity strategist at US Bank Wealth Management in Cincinnati. “There was a refinery outage in the central US, 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 for the first time since May, down 1.8 million bbl to 124.9 million. Crude supplies dropped 1.76 million to 365.6 million.

“We had a very significant drop in gasoline stocks and distillate as well,” said James Williams, an economist at WTRG Economics, an energy-research firm in London, Arkansas. “Part of that drop is due to the Kansas refinery that caught fire.”

Brent for September settlement rose 19 cents to $104.80/bbl on the London-based ICE Futures Europe exchange. It closed at $104.61/bbl on Tuesday, the lowest since Nov. 7. The European benchmark crude was at a premium of $7.57 to WTI on the ICE. It closed at $7.23 on Tuesday.



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