Ultra-Low Sulfur Diesel Futures Contract Replaces Heating Oil

CME Group Inc. (CME)’s heating oil contract on the New York Mercantile Exchange has been renamed ultra-low-sulfur-diesel futures after the April contract, the last to reflect higher-sulfur fuel, expired March 28.

The name change comes after CME Group Inc. amended its benchmark heating oil futures contract last April, lowering sulfur specifications to 15 parts per million from 2,000 parts and expanding the listed months an additional three years beginning with the May contract. New York state switched to ULSD in July last year, and other states in the northeast plan to phase in reductions in coming years.

The revisions are intended to “make a smooth transition to new lower-sulfur diesel standards for heating oil ahead of changes in environmental regulations” in the U.S. Northeast, Gary Morsches, managing director of global energy at CME Group, said in a statement in 2012.

The contract will now serve as a dual-use price benchmark for heating oil and on-road diesel markets and more closely match diesel specifications in international markets, including the European ultra-low sulfur diesel market, according to the statement.

The delivered fuel will be free from renewable fuel, biodiesel, alkali, mineral acid, grit, fibrous or other foreign matter, meeting the delivery specifications of Colonial Pipeline Co.’s Fungible Grade 62 for ultra-low sulfur diesel, according to the CME rulebook.

ULSD for May delivery on Nymex rose 2.17 cents, or 0.7 percent, to settle at $3.0687 a gallon.

To contact the reporter on this story: Barbara Powell in Dallas at bpowell4@bloomberg.net

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

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