Ultra-low sulfur diesel rose to the highest level in almost five months on speculation that a rally in gasoil amid seasonally lower stockpiles in Europe will increase demand for cargoes from the U.S. Gulf.
Futures gained 1 percent as European gasoil supplies in independent storage at Europe’s Amsterdam-Rotterdam-Antwerp oil-trading hub in the week ended today were the lowest since 2008 for this time of year, according to PJK International BV.
“The physical market here is tight for gasoil and underlying demand is better,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.
Ultra-low-sulfur diesel for August delivery rose 2.95 cents to $3.1007 a gallon on the New York Mercantile Exchange, the highest settlement since Feb. 22. Trading volume was 24 percent above the 100-day average at 3:20 p.m.
Gasoil for August delivery on the London ICE Futures Exchange advanced $5 to $928.75 a metric ton and touched a three-month high at $930.75.
ULSD’s crack spread versus West Texas Intermediate crude sank 32 cents to $22.19 a barrel. The premium over Brent increased $1.15 to $21.51.
Gasoline was little changed, following yesterday’s 0.8 percent decline, as supplies are rising even as refiners have shut units for unplanned work and fuel production is down.
The Energy Information Administration reported yesterday that gasoline supplies rose 3.06 million barrels last week to 224.1 million. Demand sank 6.1 percent from a week earlier. Gasoline output dropped 5.6 percent to 9.05 million barrels a day, the lowest rate in seven weeks, as refiners shut process units.
“The build was quite surprising given the problems we’ve seen and it’s pressuring gasoline prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
August-delivery gasoline fell 0.03 cent to $3.1098 a gallon on trading volume that was 0.3 percent below the 100-day average.
Gasoline’s crack spread versus WTI narrowed $1.57 to $22.57 a barrel. The fuel’s premium to Brent declined 20 cents to $19.19.
Supplies on the Gulf Coast, home to 45 percent of U.S. refining capacity, rose 2.06 million barrels to 78.2 million, the highest level in five months, according to EIA data. Bill Day, a spokesman for Valero Energy Corp. in San Antonio, said today that the fluid catalytic cracker remains shut for repairs at its Port Arthur, Texas, refinery.
Inventories may rise further as the 15 percent rally from $2.7306 a gallon on June 26 to $3.1343 on July 16 attracts more cargoes from abroad. Gasoline imports into PADD 1, which includes New York Harbor, the delivery point for the Nymex contract, have jumped 74 percent in the past two weeks, according to EIA data.
Traders chartered or will hire 25 Medium Range tankers for the Rotterdam-to-New York trade route, the most since May 21, according to a Bloomberg shipbroker survey on July 16.
“There are a ton of cargoes headed to the U.S. from Europe,” said Sen.
The August contract’s premium to September narrowed 0.71 cent to 6.49 cents a gallon, the smallest gap since July 11, indicating supply concerns are abating.
Pump prices, averaged nationwide, rose a 10th consecutive time, gaining 1.2 cents to $3.669 a gallon, Heathrow, Florida-based AAA said today on its website. That’s the highest level since March 23.