Diesel Slips as Higher Temperatures May Reduce Heating Demand

Diesel futures declined on speculation that demand for heating fuel will fall as temperatures are projected to climb in the U.S. Northeast.

Diesel slipped as the eastern U.S. will have higher-than-normal temperatures from Feb. 17 to Feb. 23, the U.S. Climate Prediction Center said. Imports may replenish supplies in PADD 1B, which includes New York, the delivery point for futures contracts. Stockpiles are the lowest since May 2003, according to Energy Department data.

“The expectation is that as we go through February, the effects of milder weather and resupply will put pressure on prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Ultra low sulfur diesel for March delivery fell 3.38 cents, or 1.1 percent, to $3.0165 a gallon at 10:02 a.m. on the New York Mercantile Exchange. Trading volume was 80 percent above the 100-day average. The fuel dropped 7 percent last week, the worst performer on the Standard & Poor’s GSCI commodities index.

Diesel’s crack spread versus WTI narrowed $1.324 to $26.909 a barrel. The premium over European benchmark Brent fell 81.2 cents to $17.564 a barrel.

March gasoline declined 0.71 cent to $2.7418 a gallon on trading volume that was 4.5 percent above the 100-day average. Futures settled Feb. 7 at a high for the year.

The motor fuel’s crack spread versus West Texas Intermediate, a rough measure of refining profitability, narrowed 18.6 cents to $15.388 a barrel. Its premium to London-traded Brent crude climbed 34.2 cents to $6.038.

The average U.S. pump price rose 1 cent to $3.294 a gallon, according to data from Heathrow, Florida-based AAA. It was the third consecutive increase. Prices are 28.8 cents below a year ago.

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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