Diesel Gains on Speculation Demand Will Climb From 6-Month High

May 20, 2014 4:46 pm ET

May 20 (Bloomberg) -- Diesel futures advanced on speculation that demand will climb from a six-month high and as U.S. exports grow.

Demand for distillate fuels in the four weeks ended May 9 was 4.09 million barrels a day, the highest level since November, according to government data. That may reach 4.5 million this week as export flows are forecast to increase, according to Energy Analytics Group Ltd., a fund adviser.

“Demand is already exceptionally high and exports are growing dramatically,” said Tom Finlon, director of Energy Analytics in Jupiter, Florida. “It’s very good for diesel.”

Ultra low sulfur diesel for June delivery advanced 0.83 cent, or 0.3 percent, to settle at $2.9492 a gallon on the New York Mercantile Exchange. The fuel’s crack spread versus West Texas Intermediate crude swelled 52 cents to $21.43 a barrel while the motor fuel’s premium to European benchmark Brent crude oil gained 6 cents to $14.04.

Stockpiles of distillates, including heating oil and diesel, dropped 1.12 million barrels to 112.9 million in the week ended May 9, the lowest since April 18, according to U.S. Energy Information Administration data.

Shipments abroad from the U.S. Gulf Coast, home to half of the nation’s refining capacity, rose 22 percent to 33 cargoes in the week ended May 16, according to Charles R. Weber Co., a shipbroker in Greenwich, Connecticut.

Regional Shipments

Voyages to Europe from the Gulf Coast totaled eight, while those to Latin America were “largely stable” at 12, a weekly report from the shipbroker showed. Ships calculated are transporting refined products including diesel and gasoline.

June-delivery gasoline slipped 0.06 cent to $2.964 a gallon. The premium of June over July narrowed 0.17 cent to 1.38 cents, the smallest differential for the two contracts nearest to expiration since March.

Gasoline’s crack spread versus WTI gained 14 cents to $22.05 a barrel, while the premium to Brent retreated 27 cents to $14.22, according to data compiled by Bloomberg.

The average U.S. pump price slipped 0.4 cent to $3.642 a gallon, according to data from Heathrow, Florida-based AAA. Prices are 1.2 cents below a year ago.