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The Spokesman-Review Newspaper
Spokane, Washington  Est. May 19, 1883

U.S. gas prices rise as inventories drop

John Wilen Associated Press

NEW YORK – Gas prices rose at the pump for the first time in weeks and energy futures jumped Wednesday after the government reported unexpected declines in refinery activity and inventories of gasoline and oil.

The price hikes and inventory declines suggest the refining industry is easing back from what had been a scramble to produce more gasoline to supply the peak summer driving season, which ends this weekend.

“It drives home the … continued tightness in gasoline inventories,” said Antoine Halff, head of energy research at Fimat USA LLC.

Prices at the pump rose 1.3 cents Wednesday to a national average of $2.758 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 a gallon in late May. At the time, gasoline futures rallied as the refining industry experienced an unprecedented number of unexpected maintenance and operational outages.

But as the summer progressed, refiners boosted output and gasoline inventories rose. That led to a steep sell-off in gasoline futures, and retail prices followed.

Now, Halff said, “it looks like we might have hit the top of refinery runs for the season.”

The Energy Department’s Energy Information Administration reported that refinery utilization rates fell 1.3 percentage points to 90.3 percent of capacity in the week ended Aug. 24. Analysts surveyed by Dow Jones Newswires, on average, had expected no change.

The decline in activity helped cut gasoline inventories by 3.6 million barrels. Analysts had expected a 1.8 million barrel decline.

The combination could mean gasoline supplies will continue falling, pushing prices higher, Halff said.

Light, sweet crude for October delivery rose $1.78 to settle at $73.51 a barrel on the New York Mercantile Exchange, while September gasoline rose 8.54 cents to settle at $2.1008 a gallon.

The EIA also reported that crude oil inventories fell 3.5 million barrels, much more than the 800,000 barrel decrease analysts expected. Distillate stocks, which include diesel and heating oil, increased 900,000 barrels, more than the 600,000 barrel increase analysts forecast.