Diesel Futures Tumble to Three-Week Low as Supplies Increase

Diesel futures sank to a three-week low as supplies of distillate fuels rose for a second consecutive week after imports to the U.S. East Coast increased to the highest in four years.

Futures slid as much as 1.3 percent. U.S. supplies of distillates, which include diesel and heating oil, increased 1.41 million barrels to 114.5 million in the week ended Feb. 28, the highest level since Jan. 24. A Bloomberg survey projected a decline of 1 million barrels. Imports to the region rose 8.9 percent to 332,000 barrels a day, the most since February 2010, replenishing stockpiles depleted during a frigid winter.

“The distillate number showed a nice build and that was a surprise for the market,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

Ultra low sulfur diesel for April delivery fell 3.41 cents, or 1.1 percent, to $3.0066 a gallon at 1:18 p.m. on the New York Mercantile Exchange, after touching $3.0003. Volume was 2.9 percent below the 100-day average.

Supplies along the East Coast, or PADD 1 region, where Nymex futures are delivered, jumped 1.3 million barrels to 28.8 million, EIA data show.

Distillate demand fell for the fifth straight period, dropping 2 percent to 3.55 million barrels a day, an eight-week low.

Lower Demand

Demand declined “despite weather that was both colder than normal and colder than a week earlier,” according to a BNP Paribas report today from Harry Tchilinguirian, head of commodity markets strategy and Gareth Lewis-Davies, a senior energy strategist. Poor road conditions because of the wintry weather may have affected on-road diesel consumption and deliveries of heating oil, they said.

Diesel’s crack spread versus West Texas Intermediate crude, a rough measure of refining profitability, narrowed 5 cents to $24.33 a barrel. The premium over European benchmark Brent sank 37 cents to $18.04.

Gasoline inventories fell 1.6 million barrels to 229 million, the lowest level in eight weeks and more than the 1-million-barrel drop estimated in the survey. PADD 1 supplies sank 2.8 percent to 59.5 million.

April-delivery gasoline declined 3.17 cents, or 1.1 percent, to $2.9536 a gallon on volume that was 1.6 percent below the 100-day average.

The motor fuel’s crack spread versus WTI widened 8 cents to $22.13 a barrel. Its premium to Brent sank 26 cents to $15.82.

The average U.S. pump price gained 0.4 cent to $3.464 a gallon, according to data from Heathrow, Florida-based AAA. Prices have risen 26 consecutive days to the highest level since Sept. 22. Drivers are paying 27.3 cents less than 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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