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Gasoline, Heating Oil Plunge 4.2% as Stocks Fall, Dollar Gains

2010-02-04 21:45:14.821 GMT

By Barbara Powell

Feb. 4 (Bloomberg) -- Gasoline and heating oil plunged 4.2 percent as stocks slid on concern the global economic recovery has stalled and the dollar climbed to a eight-month high against the euro.

Futures slid as the MSCI World Index dropped the most in four months and the Standard & Poor’s 500 Index lost as much as 3.1 percent on concern that an increase in U.S. initial jobless claims and European debt will stall economic recovery. The dollar gained 1.1 percent versus the euro at 4:25 p.m. in New York, weakening commodities’ investment appeal.

"We’re not trading on fundamentals today, we’re trading on global economic headlines," said Tom Knight, vice president of trading and supply at Truman Arnold Cos. in Texarkana, Texas. "The dollar is sharply higher and the stock market is lower and there’s concern about the contagion of the continued sovereign debt problem in Europe."

"Gasoline for March delivery declined 8.54 cents, or 4.2 percent, to settle at $1.9508 a gallon on the New York Mercantile Exchange, the biggest drop since Sept. 23." "They’re buying the dollar back and either getting out of commodities altogether or they’re shorting them," said Bill Adams, chief information officer of a global macro fund at ACT Currency Partner AG, a currency specialist in Zurich. "Everyone knows new prices are on the horizon because demand is so low."

Jobless Claims

Initial jobless applications increased to 480,000 in the week ended Jan. 30, the most in seven weeks, from 472,000 the prior week, Labor Department figures showed today in Washington.

European stocks plunged the most in two months on concern Portugal, Spain and Greece will have difficulty curbing their budget deficits. The dollar gained against the euro after European Central Bank President Jean-Claude Trichet said the economic outlook is subject to "uncertainty."

"The overall outlook is still pretty bearish when you look at demand and, obviously, Trichet’s comments gave the dollar more of a boost," said Phil Flynn, vice president of research at PFGBest in Chicago.

Gasoline consumption, averaged over the four weeks ended Jan. 29, was 0.5 percent below a year earlier, the Energy Department reported yesterday.

Stockpiles Fall

An unexpected drop in stockpiles last week came as refineries reduced the amount of crude and other feedstocks they processed to the lowest level for this time of year since 1995.

The gasoline crack spread, or the difference between the fuel and crude oil, based on March contracts, widened about 25 cents to $8.79 a barrel.

Heating oil for March delivery dropped 8.42 cents, or 4.2 percent, to settle at $1.9352 a gallon on the exchange. The heating oil crack spread, based on March contracts, rose about 30 cents to $8.14 a barrel.

Consumption of all distillates, averaged over the past four weeks, was 9.1 percent below a year earlier, according to the department.

Regular gasoline at the pump, averaged nationwide, rose 0.3 cent to $2.659 a gallon, the nation’s biggest motoring organization, said today on its Web site.

--With assistance from Daniela Silberstein in Zurich, Timothy R. Homan and Bob Willis in Washington and Bo Nielsen in Copenhagen. Editors: David Marino, Joe Link