Oil falls as U.S. acts to boost East Coast fuel supply

NEW YORK Fri Nov 2, 2012 6:27pm EDT

A customer uses a petrol nozzle in a gas station in Nice August 8, 2012. REUTERS/Eric Gaillard

A customer uses a petrol nozzle in a gas station in Nice August 8, 2012.

Credit: Reuters/Eric Gaillard

NEW YORK (Reuters) - Crude oil and gasoline futures fell more than 2 percent on Friday after Washington issued a waiver allowing foreign tankers to bring fuel to the East Coast from U.S. ports, holding out some promise of relief from supply disruptions caused by superstorm Sandy.

Brent crude fell for a fifth day and posted a third consecutive weekly loss as the dollar strengthened on support from a better-than-expected U.S. October jobs report and Bank of Japan worries about the Japanese economy.

Gasoline futures slumped as oil tankers and pipelines supplying New Jersey and the New York Harbor - the delivery point for the U.S. futures contract - restored more operations that had been affected by Sandy.

The U.S. government temporarily waived Jones Act restrictions on tankers carrying fuel from the Gulf Coast refining hub to the storm-ravaged Northeast, increasing the available fleet of tankers to bring fuel.

"I think economic uncertainty and next week's (U.S.) elections are weighing on oil prices. You also have the statement that the Jones Act is going to be waived for a week, suggesting some supplies are going to return," said analyst Gene McGillian at Tradition Energy in Stamford, Connecticut.

The waiver allows foreign tankers to carry fuel to the Northeast from other U.S. ports, which the Jones Act normally limits to U.S.-flagged ships. Spot gasoline prices in the Gulf Coast jumped after the waiver was granted on expectations fuel would begin to move to the East Coast.

Brent December crude fell $2.49 to settle at $105.68 a barrel, the lowest settlement since early August. Brent posted a 3.5 percent weekly loss.

U.S. December crude fell $2.23 to settle at $84.86 a barrel, the lowest settlement since early July. It also posted a third consecutive weekly decline, falling 1.6 percent.

Total U.S. crude trading volume was heavy, 27.0 percent above the 30-day average. Brent turnover lagged that of U.S. crude, but was 3 percent above its 30-day average.

U.S. RBOB gasoline futures for December delivery dropped 6 cents to settle at $2.5736 a gallon.

U.S. December heating oil retreated 8.58 cents to settle at $2.9474 a gallon, pushing below both the 200-day and 100-day moving averages, technical levels closely monitored by chart-watching traders and analysts.

Heating oil trading volume was 37 percent above the 30-day average at close to 231,000 lots traded.

Late on Friday, the U.S. Department of Energy announced it will loan diesel fuel from the Northeast emergency heating oil reserve. The fuel will be distributed to emergency responders in New York and New Jersey starting as early as Saturday.

JAPAN, EURO ZONE ECONOMIC WORRIES

In Japan, the third-largest economy, some members of the central bank warned a recession could not be ruled out given recent weakness in industrial production.

"It's the dollar strength, after the Bank of Japan warning that Japan may be slipping into recession," said Richard Ilczyszyn, chief market strategist at iitrader.com in Chicago. "It's a currency play."

Downbeat euro zone data, showing manufacturing had shrunk for a 15th month running in October as output and new orders fell, added to the bearish outlook.

Figures showing that weak economic growth, high prices and improving vehicle fuel efficiency had pushed down consumption of gasoline and diesel in most of Western Europe over the summer also weighed.

(Additional reporting by Jeffrey Jones in Calgary, Alberta, Matthew Robinson in New York, Simon Falush and Alice Bagdhjian in London, Florence Tan in Singapore; editing by Jim Marshall and Bob Burgdorfer)

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Comments (2)
niblick3 wrote:
“Prices weakened as the U.S. government temporarily waived Jones Act restrictions on tankers carrying fuel from the Gulf Coast refining hub to the hard-hit Northeast, increasing the available fleet of ships to make the journey”.

Gee, I thought President Obama said there is nothing the government can do to alter pricing of gas. Looks like if they get out of the way, prices go down.

Nov 02, 2012 3:12pm EDT  --  Report as abuse
sdrag wrote:
niblick3:

The Jones Act was passed in 1920 so many Republican presidents have had the chance to eliminate it but haven’t so blaming Obama alone is rather nonsensical. For those of us who work in the logistics industry we almost universally despise the Jones Act. Yes, if it is eliminated there is no question consumer prices will go down across the board and it adds an absurd amount of increased cost and hassle with no real benefit to anyone besides the uncompetitive American shipping and shipbuilding industry. This temporary suspension should be seen as proof enough that this piece of archaic legislation needs to go, it is glaringly obvious that both industry and consumers will benefit as a result.

Nov 03, 2012 1:42pm EDT  --  Report as abuse
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