U.S. Gulf Coast diesel weakened from a one-month high after a government report showed the area’s stockpiles grew for the first time in six weeks.
Supplies of distillates, including diesel and heating oil, on the Gulf Coast, the PADD 3 region, rose 1.43 million barrels to 37.1 million in the week ended March 15, according to the Energy Information Administration, the statistical arm of the Energy Department.
Distillate inventories increased as Gulf Coast refineries including Valero Energy Corp. (VLO)’s plant at Port Arthur and Phillips 66 at Borger, both in Texas, restarted. There’s also speculation supplies gained as exports slowed and demand for U.S. imports from Latin America fell, said Tom Finlon, director at Energy Analytics Group Ltd.
The premium for ultra-low-sulfur diesel on the coast slipped 2.75 cents to 7 cents above heating oil futures traded on the New York Mercantile Exchange at 3:57 p.m. The differential was 9.5 cents yesterday, the widest since Feb. 25, data compiled by Bloomberg showed.
“Inventories built so much in PADD 3 because runs have recovered substantially and at the same time distillates are having a hard time going out from the Gulf,” Finlon, who is based in Jupiter, Florida, said in a phone interview. “Demand from Latin America has also really slackened off so less ships are leaving.”
Refineries processed 7.39 million barrels of crude and other feedstock last week, up 138,000 barrels from a week earlier, according to EIA data. Valero returned Port Arthur units to planned rates after an electrical upset, while Phillips 66 (PSX) completed maintenance at Borger, the companies said. The two refineries have a combined capacity of 456,000 barrels a day, data compiled by Bloomberg show.
Exports from the Gulf Coast may climb in coming weeks as ship-chartering is expected to improve on higher refinery utilization rates, according to a weekly report from Charles R. Weber Co Inc., a Greenwich, Connecticut-based shipbroker. There have been rising levels of available medium-rate tankers in the region, the March 15 report showed.
U.S. distillate exports dropped to 850,000 barrels last week, the lowest level since September 2011, the EIA said today. Booking rates for vessels carrying diesel across the Atlantic Ocean to Europe slid 0.3 percent to 60.54 industry-standard Worldscale points today, the lowest level since September, data from the Baltic Exchange in London showed.
“Based on this rate, we’ll probably see ship owners to start sending more,” Finlon said
The 3-2-1 crack spread on the Gulf, a measure of refining profitability for gasoline and diesel fuel based on West Texas Intermediate in Cushing, Oklahoma, rose 1.1 cents, or 3.8 percent, to $29.02 a barrel, the first gain in five days, according to data compiled by Bloomberg.
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