April 20, 2012 / 9:00 PM / in 5 years

US gasoline futures post biggest weekly loss since Sept

NEW YORK, April 20 (Reuters) - U.S. gasoline futures posted the biggest weekly loss in seven months this week, as fears of a supply squeeze that threatened to send prices soaring for the summer fade, analysts and traders said on Friday.

The drop, which came after the specter of $5 a gallon gasoline became a hot issue in the U.S. presidential election debate, was driven by expectations that cargoes of fuel from Europe and the potential sale of one or two East Coast refineries would ease the potential for a shortfall during the driving season.

The fall has been extreme -- down more than 6 percent this week alone to $3.1427 a gallon and off almost 9 percent from March 29, when gasoline futures hit an 11-month high. At the time, it appeared three refineries on the U.S. East Coast could shut due to poor margins over the summer, roughly half of the region’s capacity.

Traders think that the likelihood that the idled 185,000 bpd Trainer, Pennsylvania, refinery of ConocoPhillips would soon be sold to Delta Air Lines -- and thereafter reopen -- has helped ease worries of a supply crunch in the East Coast.

The refinery is one of three such plants in the East Coast with a combined processing capacity of more than 1 million barrels per day that had been idled since late last year due to poor margins.

The market was also closely awaiting news on whether Sunoco would find a buyer for its Philadelphia refinery ahead of a July deadline to be shut down. Private equity firm Carlyle Group LP is in talks with Sunoco Inc to buy its 335,000 bpd refinery, a person with direct knowledge of the matter said on Tuesday.

RBOB gasoline’s crack spread against U.S. crude -- the profits refiners can make processing crude into the fuel -- closed at $28.94 on Friday, down $8.77, or 23 percent from a week ago. The spread has fallen more than $12, or 29 percent, from the record $41.06 hit on April 4, with the drop in futures, Reuters data showed.

Gasoline’s seasonal premium to heating oil futures has dwindled to less than a cent as of Friday, the lowest level since March 5 and well off highs of 24.17 cents on March 29.

“Crack spreads and even its value against heating oil show gasoline is at a weak stage right now,” said Mark Anderle, trader at TAC Energy in Dallas, Texas.

Even the calendar spread -- the value of the front month May RBOB gasoline contract against the next contract, June -- has fallen this week to just over 3 cents, from almost 8 cents last week, with May heading for expiration in just over a week.

With gasoline futures dropping, investors have been lightening their holdings in gasoline.

On Thursday, when gasoline futures fell nearly 5 cents to a seven-week low of $3.1541, open interest dropped 1,136 positions to 369,808, according to the latest data from the Chicago Mercantile Exchange’s website. CME is the parent of the New York Mercantile Exchange, where U.S. gasoline futures are traded.

On the same day, gasoline volume slid to 236,096 contracts, down 41,212 from Wednesday.

Recent shedding of long positions on gasoline have developed along with the softening of prices.

In the week to April 17, hedge funds and other large investors reduced their positions on RBOB gasoline futures and options by 211 to 87,222, just as prices fell to $3.2340 as of that date, from $3.2496 the week before, according to data from the Commodity Futures Trading Commission.

That extended the lowering of positions from the previous week, when net longs fell by 6,706 to 87,433, also in the wake of falling futures prices.

The move lower comes despite consistent drawdowns in U.S. gasoline inventories. In the latest report from the U.S. Energy Information Administration for the week to April 13, U.S. gasoline stocks have fallen for nine straight weeks. In that period, stockpiles dropped more than 18 million barrels or nearly 9 percent, to 213.97 million barrels.

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