By Barbara Powell Aug. 12 (Bloomberg) -- Gasoline futures plunged to a five- week low on speculation that demand for motor fuel will decline, as a jump in U.S. jobless claims to a five-month high signaled a slower economic recovery. Prices fell as the Labor Department reported that initial jobless claims rose by 2,000 to 484,000 in the week ended Aug. 7, the highest level since mid-February. Demand for the motor fuel was down 2.5 percent last week, the Energy Department reported yesterday. “The summer driving season is on the way out and, if the jobs market tightens up more, demand will fall again,” said Phil Flynn, vice president of research at PFGBest in Chicago. Gasoline for September delivery lost 3 cents, or 1.5 percent, to $1.9676 a gallon at 9:19 a.m. on the New York Mercantile Exchange. Prices touched $1.958, the lowest level since July 6, and have dropped 7.1 percent in three days of declines. The investment appeal of gasoline and other dollar- denominated commodities was lessened as the dollar strengthened. The U.S. currency gained 0.3 percent against the euro as of 9:24 a.m. in New York and has jumped 3.5 percent in a four-day rally as concern has grown that the U.S. economic recovery is faltering. The Federal Reserve’s Open Market Committee said Aug. 10 that “the pace of economic recovery is likely to be more modest in the near term than had been anticipated.” “There are headwinds from every direction,” said James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida. “Everyone is so fearful, and risk is off the table.” Inventories Rise The Energy Department reported gasoline inventories rose 409,000 barrels in the week ended Aug. 6 to 223.4 million, the highest level since April 30. Stockpiles of the motor fuel have expanded 2.7 percent since June 18, and are 8.6 percent above the period’s five-year average, according to the department. “We’re so well supplied,” Flynn said. The premium of gasoline over crude oil, or the crack spread, based on September contracts, widened about 43 cents to $6.30 a barrel. The spread, an indicator of refining profit margin, has dropped 38 percent this month. Supplies of distillates, including diesel and heating oil, rose 3.46 million barrels to 173.1 million, the highest since 1983. Inventories are 27 percent above the five-year average for the period. Heating oil for September delivery dropped 5.13 cents, or 2.5 percent, to $2.0239 a gallon. The heating oil crack spread, based on September contracts, slipped about 45 cents to $8.71 a barrel. Regular gasoline at the pump, averaged nationwide, fell 0.4 cent to $2.776 a gallon yesterday, AAA said on its website. To contact the reporters on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net.

Source