US gasoline futures rebound after falling for much of the week

31 August 2012 23:21  [Source: ICIS news]

HOUSTON (ICIS)--US gasoline futures rose on Friday after three consecutive days of declines.

Prices increased by 2.30 cents/gal to $3.1056/gal on Friday, after falling by over 2% since reaching a four-month high on 27 August at $3.1548/gal.

That was the highest price since 30 April, when futures were $3.1844/gal.

Initially, concerns over the impact of Hurricane Isaac on the energy infrastructure in the US Gulf coast helped drive prices up.

The run-up was short-lived, however, as prices receded for the next three days and the impact from Hurricane Isaac was not as bad as originally expected.

Consultant Dan Lippe said this was a typical pattern for gasoline futures when there is a hurricane or tropical storm on the horizon.

The potential for severe supply disruptions as a result of wind, rain and flooding will cause players in the gasoline futures market to assume the worst, Lippe said.

As a storm progresses, traders and buyers reassess their “worst-case scenario positions”, he added.

“If there is little damage and electric power is restored quickly, refineries come back on line and gasoline supply disruptions are minimal,” Lippe said. “Hence, prices rise before landfall and decline after landfall.”

Additionally, the September prompt-month contract was in its last days, expiring on Friday, and sources said market players have been shifting focus to the much-cheaper October contract, which has been trading at a deep discount to the September contract all week.

For example, the October contract settled at $2.9728/cents/gal on Friday, more than 13.00 cents/gal cheaper than the September price.

The spread has been much wider throughout the week, reaching a high of 20.48 cents/gal on 27 August.

US automobile industry group AAA predicted there would be more drivers on the road for the US Labor Day holiday this weekend, compared to the same period a year ago, also helping to boost gasoline prices.

By: Bobbie Clark
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