Diesel Futures Decline on Higher Imports With Milder Forecast

Feb 24, 2014 4:59 pm ET

Feb. 24 (Bloomberg) -- March diesel futures declined on speculation that the arrival of heating oil cargoes from Europe and milder weather will boost supplies.

U.S. East Coast distillate inventories rose in the week ended Feb. 14 after five consecutive declines and imports jumped to a four-year high, according to Energy Information Administration data. The cold gripping the region this week may moderate from March 6 to March 10, according to Matt Rogers, president of the Commodity Weather Group LLC in Bethesda, Maryland.

“Supplies continue to show up in New York Harbor,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “With March right around the corner, people are looking ahead to spring. The market is acting like this week’s cold will be the last blast of the season.”

Ultra low sulfur diesel for March delivery fell 1.2 cents, or 0.4 percent, to $3.0872 a gallon on the New York Mercantile Exchange, the lowest settlement in five days. Trading volume was 0.8 percent below the 100-day average as of 3:27 p.m.

The premium of March over April futures narrowed 2.32 cents to 3.71 cents a gallon, the smallest gap since Feb. 12. March diesel was the only contract that declined today.

“It’s going into expiration and you’re getting a roll to the next month,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “You will also have very low supplies coming out of the winter.”

Inventories, Imports

Inventories in PADD 1, the East Coast, rose 134,000 barrels in the week ended Feb. 14 to 27.5 million. Imports to the region jumped to 326,000 barrels a day, the most since February 2010.

Total U.S. distillate inventories probably declined 1.15 million barrels last week, according to the median estimate of eight analysts in a survey by Bloomberg. The EIA is scheduled to report last week’s inventories on Feb. 26.

Diesel’s crack spread versus WTI narrowed 15 cents to $25.28 a barrel. The premium over European benchmark Brent slipped 32 cents to $17.46 a barrel.

Total gasoline inventories probably fell 800,000 barrels last week, according to the survey. An average of 1.4 million barrels a day of U.S. capacity will be offline in March and 850,000 barrels in April, according to Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

“There’s all the turnarounds in the U.S.,” said Sen. “Inventories on the East Coast are not high.”

Gasoline Gains

March-delivery gasoline advanced 0.03 cent to settle at $2.8336 a gallon. Trading volume was 9.4 percent below the 100- day average as of 3:30 p.m.

East Coast supplies of the motor fuel fell 509,000 barrels to 63 million in the week ended Feb. 14, according to EIA data.

The motor fuel’s crack spread versus April West Texas Intermediate, a rough measure of refining profitability, narrowed 45 cents to $23.47 a barrel. Its premium to London- traded Brent crude fell 62 cents to $15.65.

The average U.S. pump price gained 1 cent to $3.419 a gallon, according to data from Heathrow, Florida-based AAA. Prices have risen 17 consecutive days to the highest level since Sept. 26, and are 35.8 cents below a year earlier.

--Editors: Richard Stubbe, Bill Banker