Diesel Futures Tumble to Seven-Week Low as Stockpiles Increase

Jan 09, 2014 3:49 pm ET

Jan. 9 (Bloomberg) -- Ultra low sulfur diesel futures slid to a seven-week low in New York as distillate inventories expanded in the U.S. and Europe.

Gasoil held in independent storage at the Amsterdam- Rotterdam-Antwerp oil hub in Europe jumped to a two-month high in the week to today, data from PJK International show. U.S. distillate stocks climbed 5.83 million barrels last week to 125 million, the highest level in 11 weeks, Energy Information Administration data show.

“The European winter has been very mild and stocks are rising there,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “Weather- related snags in the U.S. are easing and supplies are comfortable.”

Ultra low sulfur diesel for February delivery fell 2.8 cents, or 0.9 percent, to $2.9214 a gallon on the New York Mercantile Exchange, the lowest settlement since Nov. 19. Trading volume was 28 percent above the 100-day average as of 3:16 p.m.

“When it broke through $2.9348, the low on Jan. 6, it triggered technical selling,” said Joe Posillico, senior vice president of energy derivatives at Jefferies Bache LLC in New York.

PADD 1 distillate inventories, which include New York Harbor, the delivery point for Nymex futures, grew 2.27 million barrels to 37.6 million last week, according to EIA data.

Restarting Units

Refineries from the Midwest to the East Coast have been restarting units the past two days after record cold temperatures disrupted production and sent diesel futures up 2.05 cents Jan. 7.

“We had some refinery glitches that brought us up,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “But the reality of heavy supplies making it harder for bulls to have a case.”

Diesel’s crack spread versus West Texas Intermediate crude, a rough measure of refining profitability, narrowed 51 cents to $31.04 a barrel. The premium over European benchmark Brent narrowed 42 cents to $16.31.

Gasoline for February delivery slipped 1.37 cents, or 0.5 percent, to $2.6426 a gallon, the lowest settlement since Dec. 13. Trading volume was 6.7 percent below the 100-day average.

The motor fuel’s crack spread versus WTI widened 9 cents to $19.33 a barrel. Gasoline’s premium to London-traded Brent crude rose 18 cents to $4.60 a barrel.

The average U.S. pump price fell 0.3 cent to $3.307 a gallon, according to Heathrow, Florida-based AAA. Prices are 0.6 cent below a year earlier.

--With assistance from Lorraine Woellert in Washington. Editors: David Marino, Richard Stubbe