US gasoline rose on Wednesday on concerns about East Coast supply shortages as the energy sector struggled to restore operations disrupted by massive storm Sandy. Front-month November gasoline futures surged more than 7 percent at points during intraday activity, hitting their highest level since October 12. Wholesale buyers bought up the contract - which expires later on Wednesday - to secure physical supplies of gasoline over the coming weeks, players said.
Even as the aftermath of the devastating storm kept many motorists off the road, more than half of the gasoline service stations in the New York and New Jersey area were shut due to a combination of power outages and depleted supplies. After disruptions crippled the East Coast fuel supply network, refiners and pipelines continued to restore operations. The focus remained on Phillips 66's 238,000-barrels-per-day Linden, New Jersey plant, where low-lying parts drew flooding. Power cut off by the storm had been returned, however. "Some wholesalers may be using the expiring NYMEX gasoline contract as a way to get physical supply over the next several weeks," said John Kilduff, partner at Again Capital LLC in New York.
Gasoline inventories in the Mid-Atlantic region were already 16 percent below last year's levels before the storm hit, according to US government data. December RBOB gasoline, which will become the front-month contract on Thursday, posted a smaller increase. Oil prices registered small gains in thin trade.
November RBOB gasoline futures traded up 1.6 percent at $2.7722 per gallon at 2:08 pm EDT (1808 GMT), off an earlier high of $2.9375. The more-actively traded December contract rose 1.4 percent to $2.6531 per gallon. Brent crude oil rose 7 cents to trade at $109.15 a barrel, while US crude gained 82 cents to $86.50 a barrel. Traders awaited further news on the status of US oil inventories for the week to October 26 from US Energy Information Administration data, which was delayed until Thursday by the storm.
A report from the American Petroleum Institute released on Tuesday showed small gains in gasoline and oil stockpiles for the week, while distillate stocks showed a nearly 900,000-barrel drawdown. Opec oil output has risen slightly in October as extra supplies from Iraq, Angola and Libya have offset disruptions in Nigeria and a further decline in Iran to its lowest in two decades, a Reuters survey found on Wednesday.
The survey indicates Iraq's expansion in export capacity and continued high output from top exporter Saudi Arabia are helping to compensate for reduced supply from Iran, whose output has fallen sharply due to Western sanctions. Supply from the 12-member Organization of the Petroleum Exporting Countries has averaged 31.15 million barrels per day (bpd), up from 31.09 million bpd in September, the survey of sources at oil companies, Opec officials and analysts found.
Iranian output is unlikely to post further large declines for now, one analyst said, although more buyers could scale back purchases in 2013. Earlier this month, the European Union approved new sanctions against Iran over its nuclear programme. September's Opec total was the lowest since January 2012, when the group pumped 30.95 million bpd, according to Reuters surveys. Still, production remains just over 1 million bpd more than Opec's output target of 30 million bpd. The biggest increase came from Iraq, which has overtaken Iran to become Opec's second-largest producer after Saudi Arabia, even though bad weather slowed exports from the country's south in the second half of October.
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