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Gasoline futures rose to an 12-week high on speculation that Tropical Storm Ernesto may reduce Mexican oil output, boosting demand for fuel exports from the Gulf Coast, and a fire at Chevron Corp.’s Richmond, California, refinery may limit supply.
Gasoline gained as Ernesto is forecast to become a hurricane before it reaches Mexico’s Yucatan peninsula late today or early tomorrow, the National Hurricane Center said in an advisory at 11 a.m. East Coast time. Chevron’s 240,000-barrel-a-day refinery shut its crude unit after a fire yesterday and has no estimate for restarting it.
“There could be some Mexican production shut down due to the hurricane,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “The fire could mean a large percent of West Coast refining capacity is offline in the aftermath of all the problems we had in the Chicago Midwest area.”
Gasoline futures for September delivery rose 4.42 cents, or 1.5 percent, to $2.9664 a gallon at 11:07 a.m. on the New York Mercantile Exchange. Prices touched $2.9744, the highest intraday level since May 15.
The PADD 5 region, which covers the U.S. West Coast, has 3.03 million barrels a day of operable refinery capacity, or 18 percent of total U.S. capacity, according to Energy Department data. The Richmond plant is about 7.9 percent of West Coast refining.
“You have some fundamental support from Ernesto and the refinery fire,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.
Gasoline also gained as Brent crude rallied and on speculation that central banks, including the Federal Reserve and European Central Bank, will boost economic stimulus measures to spur growth.
Federal Reserve Bank of Boston President Eric Rosengren said on CNBC that the central bank should pursue an “open- ended” easing program of “substantial magnitude.” German Chancellor Angela Merkel backed a bond-buying plan announced last week by the European Central Bank, a spokesman said yesterday.
“The market is getting a boost on speculation for more stimulus,” Flynn said.
Brent oil for September settlement advanced $1.71 to $111.26 a barrel on the London-based ICE Futures Europe exchange. Brent’s premium over U.S. benchmark West Texas Intermediate oil widened 70 cents to $18.05 a barrel.
Higher Brent futures can boost gasoline because it raises the cost of shipments of fuel from abroad and imported oil used at U.S. refineries.
“The Brent spread moving above $18 is why you’re seeing products moving out more,” McGillian said.
Heating oil futures for September delivery rose 4.41 cents, or 1.5 percent, to $2.9771 a gallon on the Nymex. Prices touched $2.985, the highest intraday price for the front-month contract since May 10.
Regular gasoline at the pump, averaged nationwide, gained 1.5 cents to $3.634 a gallon yesterday, AAA data showed. That’s the highest price since May 25. Prices have fallen 7.7 percent from a 2012 high of $3.936 on April 4, according the nation’s largest motoring organization.
- Barbara J Powell in Dallas at Bloomberg.