ULSD Slips to Four-Week Low as Reports Signal Decline in Demand

Ultra-low-sulfur diesel slid to a four-week low as a decline in U.S. consumer spending and higher euro-area unemployment indicated less fuel demand. The crack spread narrowed.

Futures fell 1.8 percent, capping a fourth straight monthly drop, after a report that U.S. household purchases slid as incomes stagnated. Euro-area jobless rates jumped to a record 12.2 percent in April. The July ULSD contract’s crack spread versus West Texas Intermediate crude oil fell 66 cents to $25.19 a barrel at 4:42 p.m.

“We got a kick because of the consumer spending and income numbers, which mean less demand for diesel,” said Carl Larry, Houston-based president of Oil Outlooks & Opinions LLC. “Unemployment rising in the euro zone means we’re not going to be pushing more diesel over to Europe.”

ULSD for June delivery fell 5.1 cents to $2.7921 a gallon on the New York Mercantile Exchange, the lowest settlement since May 1. Trading volume was 39 percent above the 100-day average at 3:19 p.m. Prices fell 2.3 percent this week and 2.8 percent in May.

The June contract expired today. The more actively traded July contract dropped 6.28 cents to $2.7814 a gallon. July ULSD’s premium over Brent fell 53 cents to $16.74 a barrel.

Gasoline for June delivery slipped 3.36 cents, or 1.2 percent, to settle at $2.7789 a gallon. Trading volume was 20 percent below the 100-day average at 3:38 p.m. Prices have declined 2.1 percent this week and 0.8 percent in May.

Gasoline Demand

July gasoline dropped 5.24 cents to settle at $2.7549 a gallon. July’s crack spread versus U.S. benchmark WTI narrowed 55 cents to $23.75 a barrel. July gasoline’s premium over Brent fell 39 cents to $15.33 a barrel.

Gasoline demand averaged over the four weeks ended May 24 was 2.4 percent below a year earlier, according to Energy Information Administration data.

“Those macro stats are feeding into the idea that demand is so poor,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Gasoline at the pump, averaged nationwide, fell 0.7 cent to $3.612 a gallon, Heathrow, Florida-based AAA, the nation’s largest motoring organization, said today on its website. Prices are 0.8 cent 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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