US gasoline futures settle slightly up on unexpected draw

28 April 2010 21:18  [Source: ICIS news]

HOUSTON (ICIS news)--US gasoline futures barely settled in positive territory on Wednesday despite an unexpected draw in domestic stockpiles last week and gains in crude oil.

The Energy Information Administration (EIA) reported a 1.2m bbl pull out of US storage last week when analysts had anticipated a build of about 1m barrels. Total motor gasoline stockpiles were at 223.7m bbl.

Despite the depletion of inventory, the May reformulated gasoline blendstock for oxygenate blending (RBOB) contract spent most of the NYMEX trading session below Tuesday's close. However, the contract settled at $2.3327/gal, an increase of 0.59 cents.

With the May contract set to expire at the end of the week, the June benchmark added 0.46 cents to settle at $2.3330/gal.

The slight contango suggested the market was unsure of gasoline's strength in the near-term months that make up the traditional summer driving season.

Andy Lipow of Lipow Oil Associates, a consulting firm in Houston, said lofty inventory levels, a spike in imports and a higher percentage of ethanol blending on the horizon have kept gasoline prices tempered.

"As time goes on and we get closer to Memorial Day, people are going to look at storage and see there is more than adequate supply," Lipow said, referring to the holiday that has become the unofficial start to the summer driving season.

Wednesday's US Energy Information Adminsitration (EIA) storage report put gasoline stocks 5% above the same time last year and nearly 9% above the average from 2005-2009.

The recent figures came while refiners have ramped up output. US refineries ran at 89.0% of capacity in the week ended 23 April, up more than 3 percentage points week over week.

Lipow said refiners were taking advantage of increased profits, as opposed to building inventory for a demand rush.

The RBOB crack spread as of 27 April was assessed $14.12/bbl versus $11.95/bbl on 20 April.

"The refiners are running because the margins are good," he said, "and will put out the product until the margins are bad."

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By: Ryan Hickman
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