Chicago Diesel Rallies as Cheaper Prices Limit Shipments

Diesel fuel in Chicago rose to the highest price in almost eight weeks on speculation that a narrowing spread to Gulf Coast prices will limit supplies.

Prompt delivery for Chicago diesel gained 4.93 cents to $3.0836 a gallon at 4:11 p.m. New York time, the highest level since Dec. 5, according to data compiled by Bloomberg. The price was 0.31 cent below diesel fuel on the Gulf, compared with a gap of 6.75 cents on Jan. 2.

When diesel is priced higher in the Gulf than the Midwest, “it discourages a lot of would-be shippers,” said Hannah Hauman, Houston-based manager of supply and distribution at Mansfield Oil Co. That’s helped boost prices in Chicago and narrow the fuel spread between the regions, she said.

The discount of ultra-low-sulfur diesel in Chicago to New York Mercantile Exchange heating oil futures strengthened 0.5 cent to 1.5 cents a gallon, the narrowest gap since Dec. 14. Supplies of distillates including heating oil and diesel in the Midwest totaled 31.4 million barrels last week, the lowest level for this time of year since 2010, according to Energy Information Administration data.

The 3-2-1 crack spread, a measure of refining profitability based on West Texas Intermediate and ultra-low-sulfur diesel, gained 0.4422 cent to $23.509 a barrel at 4:21 p.m. That’s the sixth consecutive advance and the highest since Dec. 19, data compiled by Bloomberg show.

The 3-2-1 spread on the Gulf Coast, using WTI in Cushing and spot prices for distillates and gasoline, rose $1.325 to $23.52 a barrel, the highest since Jan. 9. The spread based on Light Louisiana Sweet oil grew $1.4822 to $5.4868 a barrel.

Ultra-low-sulfur diesel on the U.S. Gulf Coast declined 2.53 cents to 2.25 cents below futures. The same fuel in the Group 3 region fell 0.25 cent to trade at a discount to futures of 2.75 cents.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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