U.S. gasoline pulls back as Sandy hits demand more than supply
By Robert Gibbons
NEW YORK (Reuters) - U.S. gasoline and heating oil futures slid on Tuesday, pulling back from pre-Hurricane Sandy gains as several key East Coast refineries and pipelines restored operations and traders bet on an enormous hit to demand for fuel.
Although the East Coast's second-biggest plant reported some flooding and two other plants also suffered power outages that could stymie production, some traders moved to pare back the risk premium that had driven three days of gains ahead of the storm, which they feared could squeeze fuel supplies.
Instead, the focus was shifting to diminished demand for transportation fuel as Sandy paralyzed much of the region, shutting airports, shipyards, rail- and highways. The East Coast region, known as PADD 1, consumes an estimated 5.2 million barrels per day (bpd) of fuel, about a quarter of the nation's total.
"The demand destruction may be the biggest since right after the attacks of September 11," said Phil Flynn, analyst at Price Futures Group in Chicago.
Benchmark Brent crude futures fell and U.S. crude seesawed near flat in choppy, low-volume trading, as many market participants in the U.S. Northeast were among the millions of people confronted with scenes of destruction left after the monster storm smashed into the New Jersey coast.
U.S. front-month November RBOB gasoline fell 2.80 cents to settle at $2.7288 a gallon, declining after a three-day rally. Turnover was just above 97,000 lots traded, 34 percent below the 30-day average, according to Reuters data.
FLOODING AT BAYWAY REFINERY
Gasoline futures bounced off Tuesday's low of $2.6916 a gallon after Phillips 66 (PSX.N: Quote) said its 238,000-barrels-per-day refinery in Bayway, New Jersey, the region's second-largest, suffered "some flooding in low-lying areas" as well as a power outage that is expected to last one or two days. Continued...