NEW YORK Hedge funds raised bullish bets on gasoline to more than a three-month high, helping push prices at the pump to record levels for the U.S. Labor Day holiday.
Money managers increased net-long positions, or wagers on rising prices, by 3 percent in the seven days ended last Tuesday, according to the Commodity Futures Trading Commissions Commitments of Traders report on Friday. They were the highest since the week ended May 1.
Gasoline futures have advanced 22 percent from a 2012 low in June as stockpiles dropped and refineries closed. Futures reached a four-month high last week as Isaac closed 13 percent of fuel-making capacity on the Gulf coast and a gas explosion at Venezuelas Amuay plant shut production, threatening to revive the debate about energy costs as President Barack Obama seeks re-election. Crude oil, buoyed by Middle East tension and the prospect of fiscal stimulus, also boosted the motor fuel.
Everyone is pretty bullish, Stephen Schork, president of Schork Group, a consulting firm in Villanova, Pa., said Friday. The bottom line is we have a dearth of refining capacity and not enough ability to make gasoline. On top of that, weve had a big rally in oil.
Analysts say that gasoline prices should drift lower in the coming weeks as Gulf coast refineries ramp back up, the summer driving season ends and refiners switch to cheaper winter blends of gasoline.
Gasoline for September delivery rose 2 percent in the week covered by the report to $3.1261 a gallon on the New York Mercantile Exchange and closed at $3.1056 on Friday, when they expired. The fuel jumped 6.6 percent in August.
Regular gasoline at service stations, averaged nationwide, cost $3.827 a gallon on Sept. 1, a record for the date and the highest level since April 25, according to data from Heathrow, Florida-based AAA, the largest U.S. motoring group, compiled by Bloomberg. It remained at that level Sunday, 4.6 percent more than a year earlier.
The increase is helping reignite an issue that has pitted Obama, who has called for the elimination of billions of dollars of subsidies enjoyed by the oil and gas industry, against Mitt Romney, the Republican nominee.
Gasoline for October delivery advanced 0.9 percent to $2.9333 in the week covered by the report and settled at $2.9728 on Aug. 31. The futures were up 1.7 cents at $2.9898 at 1:15 p.m. in New York. The discount to September fuel reflects speculation that demand will slip as the driving season ends with Labor Day today, and the switch to winter-grade fuel thats cheaper to produce and needs to meet less-stringent emissions rules.
September contracts rose 1.3 percent to a 16-week high on Aug. 22 after an Energy Department report showed stockpiles slipped to a 10-week low, and minutes from a Federal Open Markets Committee meeting indicated policy makers may expand fiscal easing soon.
Gasoline stockpiles declined to 201.2 million barrels, the Energy Department said Wednesday. It was the lowest since the week ended May 25.
Futures gained again on Aug. 23 as Hurricane Isaac, the ninth named storm of the Atlantic hurricane season, forced offshore workers to evacuate, and threatened to curb oil and gas output from the region and suspend operations at coastal refineries.
The contracts jumped 2.5 percent on Aug. 27 to $3.1548, the highest since April 30, as the storm roared toward landfall in Louisiana. The Gulf region is home to 23 percent of U.S. oil production, 7 percent of natural-gas output and 44 percent of refining capacity, according to the Energy Department.
Isaac forced companies including BP Plc, Apache, Murphy Oil, Royal Dutch Shell and Anadarko Petroleum to temporarily shut output and evacuate workers. Closures peaked Thursday, with 95 percent of oil production shut in and 73 percent of natural gas, according to the Bureau of Safety and Environmental Enforcement.
While a substantial amount of oil and gas production remains off line, production is coming back as expected. No major damage to oil platforms or refineries have been reported.
During the storm, the strain on the U.S. refining system was compounded by increased fuel demand from Latin America and the Aug. 25 explosion and fire that killed at least 42 people and halted production from Petroleos de Venezuelas Amuay plant, which can process 645,000 barrels of oil a day.
PDVSA, as the state-owned oil producer is known, is the sole owner and operator of the refinery. The Paraguana complex has a capacity of about 950,000 barrels a day, second in size to Reliance Industries Jamnagar refinery in India, data compiled by Bloomberg show.
Rising U.S. oil and natural gas production has made the country a global export hub for gasoline and diesel. Drilling in formations such as the Bakken shale in North Dakota helped push U.S. oil output July to the highest since 1999, according to the Energy Department.
The surge in production helped the U.S. meet 81 percent of its energy needs last year, the most since 1992. The country became a net-exporter of refined products for the first time since World War II as Latin American refining capacity remained insufficient to meet the regions demand.
Venezuela imported an average of almost 38,000 barrels of refined products from the U.S. in the first five months of the year, up from about 23,000 barrels in the same period last year, according to data from the U.S. Energy Information Administration. Brazil imported an average of about 146,000 barrels a day this year through May, an increase of 17 percent from last year, the data show.
Rising oil prices also pushed gasoline higher. Crude has advanced 24 percent from a 2012 low in March as the U.S. and European Union tightened sanctions against Iran and slow economic growth raised speculation that policy makers will ease fiscal policy.
Irans output has declined 23 percent this year to 2.75 million barrels a day in August, according to data compiled by Bloomberg. Irans southern coast overlooks the Strait of Hormuz, a waterway through which about 20 percent of the worlds oil passes. The Associated Press contributed.