Diesel, Gasoline Futures Slide on Speculation of Lower Demand

Ultra-low-sulfur diesel and gasoline fell on speculation that the U.S. economy is struggling and fuel demand may decline in the fourth quarter as the impact of the recent government shutdown is felt.

Futures slid as employers added fewer workers than projected in September, indicating a lack of economic momentum ahead of the 16-day federal government shutdown that ended Oct. 17. The Energy Information Administration is scheduled to report last week’s inventories at 10:30 a.m. today in Washington.

“Products and the distillate side of the barrel in particular are attuned to the perceptions that we’ll see a slowdown in growth in the domestic economy in the fourth quarter because of the shutdown,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Ultra-low-sulfur diesel for November delivery fell 4.43 cents, or 1.5 percent, to $2.953 a gallon at 10:15 a.m. on the New York Mercantile Exchange, after touching a three-week low of $2.9468. Trading volume was 68 percent above the 100-day average.

The shutdown will reduce fourth quarter growth by 0.3 percent and the budget deal that ended it will prolong economic uncertainty, Ward McCarthy, Jefferies LLC chief economist in New York, said in a research note on Oct. 21.

The 148,000 increase in October payrolls followed a revised 193,000 gain in August, Labor Department figures showed yesterday.

Supply Estimates

The EIA will probably report that distillate supplies, including heating oil and diesel, fell 1.8 million barrels, gasoline stocks dropped 1 million barrels and crude inventories jumped 3 million barrels, according to the median of 10 analyst estimates in a Bloomberg survey.

The industry-funded American Petroleum Institute reported yesterday that distillates added 815,000 barrels, gasoline supplies were down by 510,000 barrels and crude stocks climbed 3 million barrels.

ULSD’s premium versus WTI narrowed 14 cents to $27.37 a barrel. The crack spread over Brent sank 74 cents to $15.10.

Gasoline for November delivery fell 3.96 cents, or 1.5 percent, to $2.5771 a gallon on trading volume that was 22 percent above the 100-day average. Prices touched $2.5738, the lowest intraday level since Oct. 7.

The motor fuel’s crack spread versus WTI increased 8 cents to $11.27 a barrel. The spread has more than doubled since sliding to $5.68 on Oct. 4. The spread versus Brent fell 48 cents to a 96-cent discount, the lowest level since December 2011.

Pump prices, averaged nationwide, fell 0.5 cent to $3.339 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are 30.9 cents below a year ago.

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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