Gasoline futures jump to four-month high; contango narrows

Gasoline jumped to a four-month high as the March contract’s discount to April futures narrowed for the first time in four days.

The March-delivery gasoline rose the most since Nov. 9. The March-April spread shrank 3.66 cents to 19.98 cents, after reaching the widest in seven years yesterday for the contracts nearest to expiration on speculation winter-grade supply is ample. April futures represent summer-grade fuel, which costs more to refine and blend. East Coast supplies rose last week while total U.S. inventories fell, Energy Information Administration data show.

“It’s surprising that gasoline continues to rally,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “National inventories drew this week due to the lower inventories in PADD 5 while RBOB on the East Coast in PADD 1 built substantially.”

Gasoline for March delivery advanced 8.12 cents to $3.1166 a gallon on the New York Mercantile Exchange on volume that was 42% above the 100-day average. It was the highest settlement since Sept. 28, when futures reached $3.342. Prices extended gains to $3.1364 after the trading floor closed at 2:30 p.m.

The motor fuel has been the top performer this year on the Standard & Poor’s GSCI index of 24 commodities with an 11% gain. The April gasoline crack spread versus Brent crude on the ICE Futures Europe exchange rose to $21.29 a barrel, the biggest difference since May 2011.

The rally accelerated as prices rose above key chart points, instigating further buying.

’Program Buying’

“When it passed $3.085 and $3.10 today, it triggered a lot of program buying from hedge funds and commodity trading advisers,” said Michael Smith, president of T&K Futures & Options in Port Saint Lucie, Florida.

Gains also widened as spot markets climbed in Chicago and the Gulf Coast as Citgo Petroleum’s Lemont refinery in Illinois had a process unit upset and Motiva Enterprises LLC began shutting units at its Port Arthur, Texas, refinery for work and was gradually ramping up rates on its largest crude unit.

“The rumor was there was a fire at Citgo Lemont and the Chicago cash market heated up,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

The futures contracts are based on reformulated gasoline, or RBOB. Gasoline stockpiles in the East Coast, or PADD 1 region, which includes the Nymex delivery point in New York Harbor, jumped 1.7 million barrels to the highest level since March 16 last week, according to the EIA, the Energy Department’s statistical arm. Total U.S. supplies fell 803,000 barrels to 233.2 million.

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