Market Insider
- Stocks Sputter as Investors Seek Catalyst
- Gasoline Price Spike Has Temporary Offset
- Spring Home Buying Season: Good, But Not Good Enough?
- Where’s the French?
- What's Shaking: Wednesday's Early Movers
- Oil Could Turn to Headwind as Dow Flirts With 13,000
- Iran, Economy Threaten Higher Oil Prices
- What's Shaking: Tuesday's Early Movers
- Oil Surges 2% as Iran Halts Some Oil Shipments
- Market Outlook: Everyone Is Waiting for a Stock Pullback
EDITOR
RSS FEED
Fear of Refining Issues Light Up Gasoline Futures
Text Size 
CNBC Producer
Concerns about shrinking refining industry capacity put a fire under gasoline futures Friday, after news reports that a major east coast refinery shut down for repairs.
 |
February RBOB gasoline futures [RBCV1
Loading...
()
] settled nearly 3 percent higher, closing at a 5-month high. ConocoPhillips [COP
Loading...
()
], during the trading day, was reported to have shut down gasoline production output at its Bayway refinery in Linden, N.J. to repair a mechanical problem.
But after the market close, the Bayway refinery was reported to be ready to go back into service as early as Friday night. The news wire report said problems with mechanical valves at the Bayway gasoline making fluid catalytic cracking unit were not as serious as first believed.
Seperately, the first of hundreds of employees have been laid off from ConocoPhillips’ Trainer, Pa. refinery, which has failed to find a buyer after four months on the market.
About one million barrels per day of refining capacity has been taken off line on the east coast and St. Croix, as the industry responds to low margins and shrinking demand. St. Croix's Hovensa is expected to shut down all of its refining operations in the next month.
Some traders are concerned the industry will become increasingly vulnerable to gasoline supply pressures, as the summer driving season approaches.
“There’s pressure on the refining industry right now, but when demand does come back, expect a squeeze in the industry,” according to Nymex trader Anthony Grisanti.
Demand for physical gasoline may be waning, but demand for the futures contract is hitting a record. Open interest in the NYMEX RBOB contract hit an all-time high this week, surpassing 330,000 contracts, for the first time in history.
Earlier this week, Swiss-based Petroplus added to refining capacity losses, when it declared bankruptcy and shut down major refineries in the U.K. and Germany.
Two Sunoco [SUN
Loading...
()
] refineries also face an uncertain future. The company has already idled a refinery in Marcus Hook and has previously announced it may have to close its Philadelphia refinery in July 2012 if a new owner isn't found.
Poor market conditions have accelerated the idling of the Marcus Hook refinery in December, but as for Philadelphia “it is still operating,” according to Tom Golembeski at Sunoco.
He notes that Sunoco is currently in the process of selling the refineries, and there are “interested parties.” He declined to comment further, due to confidentiality agreements.
As for Sunoco, analysts and traders alike will be will be listening closely to the conference call next Thursday when it reports earnings. Analyst Tom Kloza of OPIS, however, isn’t expecting Sunoco to announce a Philadelphia closure on the call.
“My hunch is that they will not announce anything on their earnings conference call next week. But it continues to be an albatross on the entire company,” Kloza says.
- The economy is heating up but the Fed isn’t letting up. How do you play the fixed-income market?
- With its rich oil reserves and rampant corruption, Azerbaijan poses a dilemma for U.S. policy makers.
- Business owners should occasionally consider giving their work for free. Here are several reasons why.
- GOP Governor Chris Christie wants Warren Buffett to stop talking about higher taxes on the super-rich.
- There’s a shortage of hotel rooms in London for the Olympics, so many locals are renting out their opulent private homes.
- Boston Beer will be creating a special commemorative brew, the Samuel Adams Boston 26.2, to mark this year's Boston Marathon.
Data is a real-time snapshot *Data is delayed at least 15 minutes
