ULSD Falls as China Manufacturing Slowdown Sends Oil Tumbling

Ultra-low-sulfur diesel fell as a slowdown in China’s manufacturing sent oil tumbling and raised concern that global demand for distillates will decline.

ULSD slid along with the U.S. and London benchmark crudes after China’s manufacturing contracted in May for the first time in seven months, indicating slowing economic growth in the world’s second-largest energy consumer. Gasoil slid in Europe, reducing the incentive to export distillates to that region.

“China’s growth, the minute it starts to disappear, the longs who have piled into the market have to think if they want to expose themselves to risk,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Ultra-low-sulfur diesel for June delivery fell 4.03 cents, or 1.4 percent, to $2.8333 a gallon at 9:49 a.m. on the New York Mercantile Exchange on trading volume that was 37 percent above the 100-day average for the time of day.

July ULSD’s crack spread versus West Texas Intermediate crude oil shrank by 1.5 cents to $26.19 a barrel. July ULSD’s premium over Brent fell 24 cents to $17.64 a barrel.

Gasoil for delivery in June on the ICE Futures Exchange in London declined $18.25 to $848.50 a metric ton.

Gasoline for June delivery slid 1.8 cents, or 0.6 percent, to $2.8014 a gallon on trading volume that was 5 percent above the 100-day average for the time of day.

Futures dropped as much as 1 percent following an Energy Information Administration report showing that supplies of the motor fuel gained 3.02 million barrels in the week ended May 17, the most since April 12. A Bloomberg survey predicted a drop of 300,000 barrels.

The fuel’s crack spread versus WTI widened 96 cents to $24.79 a barrel. July gasoline’s premium over July Brent rose 64 cents to $16.15.

Gasoline at the pump, averaged nationwide, fell 0.1 cent to $3.659 a gallon, Heathrow, Florida-based AAA, the nation’s largest motoring organization, said today on its website. Prices are 1.9 cents below a year earlier.

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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