Monday, April 18, 2011

Gasoline declined as equities tumbled after Standard & Poor’s Ratings Services revised its outlook on the U.S.’s long-term sovereign credit rating to negative from stable.

Futures fell from a 33-month high as Standard & Poor’s said there’s a “material risk” that U.S. policy makers may not agree on a plan to address long-term budget issues by 2013. Prices rose 0.9 percent last week as East Coast refinery shutdowns curtailed fuel production and a jump in consumer confidence indicated fuel demand may increase.

“What’s really moved the market is the S&P downgraded our outlook to negative,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This raises concern that the U.S. is going to have to raise interest rates to attract equity, which will slow demand for oil down the road.”

Gasoline for May delivery dropped 4.34 cents, or 1.3 percent, to $3.2458 a gallon at 1:04 p.m. on the New York Mercantile Exchange.

At the same time, the Standard & Poor’s 500 Index retreated 1.6 percent in New York.

Standard & Poor’s affirmed its AAA long-term and A-1+ short-term sovereign credit ratings on the U.S.

Gasoline fell before the S&P report, following crude oil, after Saudi Oil Minister Al al-Naimi said the global “market is oversupplied” and China increased bank reserve requirements.

“As China continues to increase bank reserves, that would slow down lending and temper growth going forward, which in turn affects petroleum demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
China Reserves

Reserve ratios will rise a half-point from April 21, the People’s Bank of China said in a one-sentence statement on its website today. The move, taking the requirement to 20.5 percent for the nation’s biggest lenders, came less than two weeks after the central bank boosted benchmark interest rates.

Brent crude for June settlement lost $2.02 to $121.43 a barrel on London’s ICE Futures Europe exchange. Nymex May- delivery crude fell $2.58 to $107.08 a barrel.

Gasoline’s advance April 15 to the highest level since July 2008 was boosted by concern that violence during Nigerian elections, including the April 16 presidential contest, may disrupt production of the light, low-sulfur crude that is used by some East Coast refineries.

Nigerian presidential incumbent Goodluck Jonathan may be formally declared the winner of Nigeria’s presidential election after winning almost twice as many votes as his closest rival, while opposition protests spread in six northern cities.
Nigerian Crude

Nigeria’s crude is low-sulfur, similar to the grade produced in Libya, where civil conflict lowered output by about 1.3 million barrels a day to a “trickle,” the Paris-based International Energy Agency said in March.

“Concern about Nigeria, that’s what ratcheted us up on Friday, and that’s eased,” said Ray Carbone, president of Paramount Options Inc. in New York. “Today’s decline is also being exacerbated by the drop in the stock market and the strength in the dollar and the possibility of higher interest rates in the U.S.”

The dollar rose 1.4 percent against the euro as of 1:05 p.m. in New York. A stronger dollar reduces the investment appeal of commodities.

Regular gasoline at the pump increased 0.6 cent to $3.833 a gallon yesterday, AAA said on its website. That’s the highest price since Sept. 18, 2008.

Federal Reserve Bank of Atlanta President Dennis Lockhart said today that he expects a “soft” first quarter in the U.S. because of the impact of rising gasoline prices on consumer spending.
Gasoline Supplies

U.S. supplies of gasoline probably fell 1.75 million barrels last week, according to the median estimate of eight analysts in a survey by Bloomberg News. That would leave inventories at the lowest level since Nov. 12. Stockpiles of distillates, including heating oil and diesel, rose 400,000 barrels, according to the survey.

Heating oil for May delivery declined 5.03 cents, or 1.6 percent, to $3.1739 a gallon on the exchange.


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