Unleaded Gas Futures Options Trading

Unleaded Gasoline Futures: Oil Rises to Eight-Week High, Gasoline Surges on Fuel Supplies

March 10^th, 2010

Crude oil rose to an eight-week high and gasoline futures surged after a government report showed that U.S. fuel supplies declined as demand climbed and refineries idled units.

Gasoline inventories dropped 2.96 million barrels to 229 million in the week ended March 5, the Energy Department said. Total fuel consumption increased 0.2 percent to 19.7 million barrels a day, the highest level since August. Refinery operating rates fell for the first time in five weeks.

“The big driver over the last few weeks has been gasoline, and that’s backed up by today’s numbers,” said Richard Ilczyszyn, a Chicago-based senior market strategist with Lind- Waldock, a division of MF Global Ltd.

Crude oil for April delivery rose 60 cents, or 0.7 percent, to $82.09 a barrel on the New York Mercantile Exchange, the highest settlement since Jan. 11. Futures are up 80 percent from a year earlier.

Gasoline for April delivery climbed 2.48 cents, or 1.1 percent, to end the session at $2.2851 a gallon in New York. Heating oil for April delivery increased 2.64 cents, or 1.3 percent, to $2.1162.

The 17 analysts surveyed by Bloomberg News before the report’s release were split over whether gasoline inventories increased or declined last week.

Gasoline Consumption

Gasoline demand rose 1.2 percent to an average 8.99 million barrels a day, the report showed. Consumption of the fuel peaks during the so-called driving season, which lasts from the Memorial Day weekend in late May to Labor Day in early September.

“Crude oil prices have shot up since January, which only means that gasoline prices have to follow it higher as we go into the summer,” Stephen Schork, president of consultant Schork Group Inc. in Villanova, Pennsylvania, said today on Bloomberg Radio.

Prices in New York have climbed 13 percent from the Jan. 29 settlement of $72.89.

Supplies of distillate fuel, a category that includes heating oil and diesel, decreased 2.22 million barrels to 149.6 million. Stockpiles were forecast to drop by 1 million barrels.

Refineries operated at 80.7 percent of capacity last week, down 1.1 percentage points from the previous week. Analysts forecast that there would be no change.

Inventories of crude oil rose 1.43 million barrels to 343 million. It was the sixth straight gain and left stockpiles at the highest level since August. Supplies were forecast to climb by 2 million barrels.

Chinese News

“Supplies were expected to rise 2 million barrels, so the 1.4-million-barrel gain is bullish,” said Sean Brodrick, a natural resource analyst with Weiss Research in Jupiter, Florida. “Even more bullish is the news from China where exports are surging and car sales are up.”

Chinese exports climbed 46 percent in February from a year before after a 21 percent advance in January, the customs bureau reported on its Web site today. The country’s passenger car sales rose 55 percent last month from a year earlier, the China Association of Automobile Manufacturers said yesterday. China is the world’s second-biggest oil-consuming country after the U.S.

Oil also advanced after the Organization of Petroleum Exporting Countries predicted members will need to produce more oil than previously forecast. The 12-member group will need to pump 28.94 million barrels a day to satisfy demand in 2010, according to a report today. That’s about 190,000 barrels a day more than last month’s projection.

OPEC Meeting

OPEC will meet March 17 in Vienna to decide production quotas. Shokri Ghanem, chairman of Libya’s National Oil Corp., said this week that “no new decision” about production levels is expected at the meeting. Projected demand levels are still “much less” than OPEC’s current production, meaning stockpiles could increase, the group said today.

The dollar dropped against the euro as former European Commission President Romano Prodi said that the worst of Greece’s financial crisis is over and other nations in the region won’t follow in its path.

“For Greece, the problem is completely over,” said Prodi, who was also Italian prime minister, in an interview in Shanghai today. “I don’t see any other case now in Europe. I don’t think there is any reason to think the euro system will collapse or will suffer greatly because of Greece.”

The greenback traded at $1.3657 per euro, down 0.4 percent from $1.3602 yesterday. A weaker dollar bolsters the appeal of raw materials as an alternative investment.

Brent Oil

Brent crude oil for April delivery rose 57 cents, or 0.7 percent, to end the session at $80.48 a barrel on the London- based ICE Futures Europe exchange. Today’s settlement was the highest since Jan. 11.

Oil volume on the Nymex was 727,611 contracts as of 3:27 p.m. in New York. Volume totaled 651,267 contracts yesterday, 12 percent more than the average of the past three months. Open interest was 1.35 million contracts, the highest since Feb. 2.

The exchange has a one-business-day delay in reporting open interest and full volume data.

---With assistance from Emily Feldman in New York. Editors: Joe Link, Richard Stubbe

- Mark Shenk in New York at Bloomberg.