Gasoline Retreats on Demand Concerns; Oil Inches Higher
After rallying Monday in anticipation of Hurricane Sandy, gasoline futures retreated Tuesday on concerns about lower energy consumption.
Gasoline futures settled at $2.729 a gallon, down 2.8 cents, or about 1%. Front-month U.S. crude futures for December delivery jumped 14 cents, or 0.2%, to settle at $85.68 a barrel. Brent futures settled 36 cents, or 0.3% lower to $109.08.
Tuesday's trading was a reversal of the outcome Monday, when the market bid up gasoline in anticipation of potential damage to Northeastern refineries but priced crude oil lower due to reduced crude demand from refineries.
On Tuesday, however, analysts said the greater concern was over lower gasoline consumption due to the effects of Hurricane Sandy across a wide swath of the U.S.
"Demand concerns are definitely going to be an issue," said Carl Larry, president of consulting firm Oil Outlooks.
Analysts also said the lower gasoline prices were a sign that the market believes the East Coast refineries that shut down, or scaled back production, emerged from the storm without significant damage.
On Tuesday, Philadelphia Energy Solutions said it began resuming normal operations at its Philadelphia refinery, while PBF Energy said its "emphasis returns to routing operations."
Two refineries, Phillips 66's Linden, N.J., refinery, and Hess Corp.'s facility in Port Reading, N.J., remained completely shut down. Phillips said in a statement that the Linden plant was without power and had suffered some flooding in low-lying areas. Hess said its Port Reading facility lost power Monday night. The two plants together process 308,000 barrels of oil a day.
Mark Waggoner, president of Excel Futures, said the trading of gasoline futures Tuesday shows the market thinks the "refineries are down, but not really damaged."
Mr. Larry said higher crude prices reflected higher demand for oil in the Midwest and Gulf Coast because of the need of refineries in those regions to make up for lost output in the Northeast due to refinery outages.
Heating oil futures Tuesday settled at $3.087 per gallon, down 2.86 cents or 0.9%.
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