That issue would probably depend upon the what the contract says about that issue. If it is silent on the issue then I would think it would be OK unless there is some type of licensing requirement for them to resell.
I agree with Bruce Wilson. A city is not prevented from re-selling its assets (such as fuel) or re-selling at a profit unless there is some agreement limiting that right in the contract with the entity that they city bought the fuel from.
Cities are required to account for any fuel they purchase, and to make sure that it is being used in city vehicles. The only limitation I know of relating to city fuel supplies, is that they are not allowed to use it for personal vehicles.
I assume that as long as they are not selling the fuel for less than they bought it, it would be okay. However, they could be breaching an agreement they reached with whoever they purchased the fuel from.