October 24th, 2012

Gasoline fell for a 10th consecutive day, extending a losing streak to the longest since the start of New York futures trading in 1986, as fuel supplies surged to the highest level in almost two months.

Gasoline futures slipped after the Energy Department reported stockpiles rose 1.44 million barrels to 198.6 million, the highest level since Aug. 31. The median forecast by 11 analysts surveyed by Bloomberg called for an increase of 500,000 barrels. The fuel is down 22 percent this month as refineries, including Delta Air Lines Inc. (DAL)’s Trainer plant, started units.

“We’ve seen the restart of the Trainer refinery and restart of a number of other units that could supply the East Coast, so the supply situation has improved,” Andy Lipow, president of Lipow Oil Associates LLC, an energy consulting firm in Houston, Texas, said by phone. “In conjunction with the supply improvement, this is the time of year we expect this type of pressure on gasoline.”

Gasoline futures for November delivery dropped 0.2 cent to settle at $2.603 a gallon on the New York Mercantile Exchange, a four- month low. This is the longest down streak since futures began trading in May 1986.

Demand for the motor fuel sank 2.7 percent to 8.49 million barrels a day, the lowest level since March 16, department data show. Over the past four weeks, consumption was down 1.8 percent from a year ago.

Gasoline: ‘Terrible’ Demand

“Gasoline demand has been terrible all year and the negative demand this week is not a good thing, and with gasoline numbers continuing to be disappointing there’s been a downward bias to prices,” David Pursell, managing director and head of securities at Tudor Pickering Holt & Co., said by phone from Houston today.

Gasoline’s decline has been part of a broader drop in energy and other commodities. Crude oil is down 13 percent on Nymex since settling at $99 a barrel on Sept. 14. The Standard & Poor’s GSCI index is down 8.3 percent in that period.

“There has been a wide nervousness overall about economic health — demand concerns, crude has been falling and a basket of broader commodity weakness,” Pursell said. “The overarching theme is that there is a lot of uncertainty around the world right now and gasoline is getting caught up in that.”

Delta expects its 185,000-barrel-a-day Trainer refinery in Pennsylvania, which is now processing jet fuel, to be fully operational during this quarter, according to a company statement released today.

Gasoline: Trainer Refinery

Trainer is the third-largest plant on the East Coast and has been shut since former owner ConocoPhillips took it offline in September, 2011, according to data compiled by Bloomberg.

Refiners including Exxon Mobil Corp., Valero Energy Corp. and Citgo Petroleum Corp. are also starting units after repairs, indicating supplies will increase and prices may drop more as the U.S. approaches the Nov. 6 presidential election, where incumbent President Barack Obama faces Republican challenger Mitt Romney.

Obama supports increasing fuel-efficiency standards for vehicles, while Romney accuses him of impeding oil producers. The International Energy Agency, adviser to 28 advanced economies, said oil prices are too high and threaten to derail the global economic recovery.

The futures contract traded in the 1980s and 1990s was phased out in 2006 and replaced with one that allowed blending with ethanol, after several states banned the use of methyl tertiary butyl ether because of groundwater contamination.

The average nationwide price for regular gasoline at the pump declined 2.3 cents to $3.625 a gallon yesterday, AAA, the largest U.S. motoring organization, said today on its website. That’s the lowest level since Aug. 5. The pump price reached a 2012 high of $3.936 on April 4.

By election day, the national average will slide to about $3.40 to $3.50, Heathrow, Florida-based AAA said on Oct. 22.

Heating oil futures for November delivery declined 0.4 cent to settle at $3.0394 a gallon on the exchange, a two-month low. It was the ninth straight decline for the fuel, the longest since January 2010.

- Ramsey Al-Rikabi in Singapore and Christine Harvey in New York at Bloomberg.