Diesel Rises to Two-Week High on Colder Weather, Economic Data

Jan 17, 2014 3:31 pm ET

Jan. 17 (Bloomberg) -- Diesel futures rose to a two-week high as a cold blast headed for the U.S. East Coast and U.S. home construction dropped less last month than forecast.

Futures gained 1.3 percent. Below-normal temperatures are expected from the Midwest to New England from Jan. 21 to Feb. 3, dipping below zero Fahrenheit in Chicago and boosting energy demand across much of the eastern U.S. Housing starts fell 9.8 percent to a 999,000 annual rate, according to Commerce Department figures. That exceeded the estimate of 985,000 in a Bloomberg survey of 83 economists

“Diesel is still getting support off of cold weather,” said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. “Any positive macroeconomic guidance brings buyers into the market.”

Ultra low sulfur diesel for February delivery gained 3.92 cents to $3.0237 a gallon on the New York Mercantile Exchange, the highest settlement since Dec. 31. Trading volume was 48 percent above the 100-day average at 3:06 p.m.

Diesel’s crack spread versus West Texas Intermediate crude, a rough measure of refining margin, climbed $1.24 to $32.63 a barrel. The premium over European benchmark Brent on the ICE Futures Europe exchange increased 9 cents to $17.59.

U.S. demand for distillate fuels, including heating oil and diesel, climbed 702,000 barrels a day to 3.72 million last week, the highest level since Dec. 20, according to EIA data. Ultra low sulfur diesel is traded as a proxy for heating oil, which is used by about one-quarter of households in the U.S. Northeast.

Cold Snap

New York may see a low of 11 degrees Fahrenheit (minus 12 Celsius) by Jan. 22, with Boston reaching the single digits and Philadelphia and Washington hovering in the teens, according to MDA Weather Services in Gaithersburg, Maryland. Chicago may tough minus 4 and Atlanta will be in the 20s.

Gasoline for February delivery climbed 2.53 cents, or 1 percent, to $2.6204 a gallon after falling yesterday to a two- month low. Trading volume was 5.5 percent above the 100-day average.

The fuel’s crack spread to WTI widened 65 cents to $15.69 a barrel, while gasoline’s premium to Brent oil increased 11 cents to $4.02 a barrel.

Regular gasoline prices at U.S. pumps, averaged nationwide, fell 0.6 cent to $3.296 a gallon, a sixth consecutive decline, according to data from Heathrow, Florida-based AAA, the nation’s largest motoring company. Prices are 0.4 cent above a year ago.

--With assistance from Brian K. Sullivan in Boston. Editors: David Marino, Richard Stubbe