June 4th, 2012

Gasoline futures rose, reversing an earlier loss, as the dollar fell against the euro after European leaders agreed to discuss more cooperation among banks using the European benchmark currency.

Gasoline futures advanced as a weaker dollar boosted the investment appeal of commodities. The euro was up 0.6 percent against the U.S. benchmark after German Chancellor Angela Merkel said systemic banks may need supervision at the European level as the European Union weighs possible steps toward “political union.”

“I think the market is taking its cues from the dollar today,” said Fred Rigolini, vice president of Paramount Options Inc. in New York. “I don’t think there’s a shift in overall sentiment. The market has been overextended and we’re just seeing people taking some money out.”

Gasoline futures for July delivery rose 1.39 cents, or 0.5 percent, to settle at $2.6707 a gallon on the New York Mercantile Exchange.

Gas futures rebounded from an earlier decline amid speculation that the Federal Reserve may take further steps to boost the U.S. economy.

Michael Pond, co-head of interest-rate strategy at Barclays Plc, says it is “increasingly likely that the Federal Reserve will come with another round of stimulus as early as the June 20 meeting.” Pond spoke with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.”

Further Easing

“The odds of another round of quantitative easing have gone up quite a bit in the U.S. and there’s the sense that governments around the world will be forced into major stimulus to stop the bleeding,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Prices fluctuated earlier, touching $2.5971, the lowest intraday price since Dec. 21, as Europe’s debt crisis and slower growth in China indicated the global economic recovery is stalling, curbing fuel demand.

China’s non-manufacturing industries expanded at the slowest pace in more than a year. Bookings to U.S. factories dropped 0.6 percent after a revised 2.1 percent decrease in March, the first back-to-back declines in more than three years, figures from the Commerce Department showed today in Washington.

“There’s a lot of global economic uncertainty, with the Chinese PMI the lowest in a year and Merkel’s announcement she’s not in favor of euro-zone bonds,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Heating oil futures for July-delivery fell 0.1 cent to $2.6269 a gallon on the exchange, the lowest settlement since Jan. 25, 2011.

Regular gasoline at the pump, averaged nationwide, fell 0.5 cent to $3.585 a gallon yesterday, according to AAA. It was the lowest level since Feb. 21. Gasoline is down 8.9 percent since reaching a 2012 high of $3.936 on April 4.

- Barbara J Powell in Dallas at Bloomberg.