Diesel Gains on Petrobras Refinery Fire, Cold Snap Across U.S.

Ultra low sulfur diesel rose as a refinery fire in Brazil may increase U.S. exports and as frigid weather in the U.S. increased demand for heating fuel.

Futures advanced as Petroleo Brasileiro SA’s Reduc plant in Duque de Caxias, Brazil, had a fire in a coker on Jan. 4. That follows a blaze at another Petrobras plant in late November. The coldest air in almost 20 years is sweeping across the U.S. from the Midwest toward the East Coast.

“The second fire in a month for Petrobras increases the need for more imports of gasoline and diesel from the U.S.” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “If you’re a paper trader and you want to get exposure to weather you will trade ULSD or gasoil and the cold bolsters demand for heating fuel.”

Ultra low sulfur diesel for February delivery rose 2.05 cents, or 0.7 percent, to $2.9599 a gallon at 9:57 a.m. on the New York Mercantile Exchange. Trading volume was 29 percent above the 100-day average.

Chicago’s high today won’t reach zero Fahrenheit (minus 18 Celsius) and may just hit that tomorrow, according to the National Weather Service. New York City’s low will fall to 7, Washington will also see 7 and Dallas’s low will be 19. Hard freeze warnings and watches, which are alerts to farmers, stretch from Texas to Central Florida.

“People might also be concerned that the cold will impact refinery operations,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “I expect in the Houston area here will be some run cuts overnight. When it’s cold outside the equipment doesn’t run so well.”

Crack Spreads

The fuel’s crack spread versus West Texas Intermediate crude, a rough measure of refining profitability, widened 89 cents to $30.39 a barrel. The premium over European benchmark Brent rose 12 cents to $17.04.

Gasoline for February delivery advanced 0.38 cent to $2.6526 a gallon on trading volume that was 11 percent above the 100-day average.

The motor fuel’s crack spread versus WTI widened 13 cents to $17.42 a barrel. Gasoline’s premium to London-traded Brent crude fell 48 cents to $4.10 a barrel.

The average U.S. pump price was unchanged at $3.317 a gallon, according to Heathrow, Florida-based AAA. Prices are 1.8 cents below a year earlier.

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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