Diesel Futures Slip as Brent Crude, Gasoil Weaken in Europe

Ultra low sulfur diesel futures retreated in New York as Brent crude and gasoil contracts weakened in Europe.

Prices sank as much as 0.7 percent as Brent slipped 0.7 percent and gasoil slid 1.2 percent on the ICE Futures Europe exchange. A drop in Brent, the international benchmark reduces feedstock costs for refiners in Europe and along the U.S. East Coast processing oil from the North Sea and West Africa. The gasoil decline reduced the profit from exporting distillate fuel from the U.S. to Europe.

“Diesel is being dragged down by Brent,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

ULSD for January delivery fell 2.02 cents to $2.97 a gallon at 10:56 a.m. on the New York Mercantile Exchange. Trading volume was 24 percent below the 100-day average.

ULSD’s crack spread versus West Texas Intermediate, a rough measure of refining profitability, lost $1.03 to $27.08 a barrel. The crack spread versus Brent was $16.15 a barrel, based on February contracts, unchanged from yesterday.

The Energy Information Administration will probably report tomorrow that supplies of distillates, including diesel and heating oil, were unchanged last week, according to the median estimate of nine analysts in a survey by Bloomberg. Supplies rose during the past two weeks, after dropping in 10 of the previous 11 periods. The EIA is scheduled to report last week’s inventories at 10:30 a.m. tomorrow in Washington.

EIA Survey

The survey projected that gasoline stockpiles increased 1.5 million barrels. Gasoline supplies in the week ended Dec. 6 rose 6.72 million barrels as refinery rates jumped to a nine-year seasonal high.

“Given such high refinery runs there is no dearth of supplies,” Sen said.

Gasoline for January delivery was unchanged at $2.6437 a gallon on trading volume that was 20 percent below the average.

The motor fuel’s crack spread versus WTI narrowed 20 cents to $13.36 a barrel. Gasoline’s premium to Brent was $2.94 a barrel, based on February contracts, up from $2.34 yesterday.

The average U.S. pump price fell 0.6 cent to $3.222 a gallon, the ninth consecutive decline, Heathrow, Florida-based AAA said today. Prices are the lowest since Nov. 20.

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

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

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