Ultra-low-sulfur diesel slid as crude oil fell the most in a month amid higher U.S. output and slower manufacturing in China.
Futures fell 0.7 percent as crude tumbled after the Energy Information Administration reported oil production rose last week to the most since December 1990. China’s manufacturing weakened more than estimated in July, according to a preliminary survey of purchasing managers. Inventories of crude declined 0.8 percent, gasoline supplies slipped 0.6 percent and distillates dropped 1 percent.
“Manufacturing data from China was bearish and with production at a 22-year high we have to store as much oil?” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Plus, the market has been anticipating drawdowns on supply and numbers weren’t big enough to keep the bulls interested.”
Ultra-low-sulfur diesel for August delivery fell 2.23 cents to settle at $3.047 a gallon on the New York Mercantile Exchange on trading volume that was 8.6 percent above the 100-day average at 3:05 p.m. Prices have fallen 1.7 percent since reaching $3.1007 on July 18.
ULSD was valued less than gasoline for the first time in three days, slipping 1.7 cents to an 0.78-cent discount.
“The market is being weighed on by Chinese manufacturing figures coming in lower than expected,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Anything that reflects slowing growth in Asia will impact on demand for crude oil.”
ULSD’s crack spread versus West Texas Intermediate crude increased 93 cents to $22.74 a barrel. The premium over Brent rose 32 cents to $20.94.
Distillate inventories fell 1.23 million barrels to 126.5 million, the first drop in three weeks. Demand jumped 13 percent to 4.31 million barrels a day.
Gasoline supplies sank 1.39 million barrels last week to 222.7 million. A Bloomberg survey projected a build of 1.65 million barrels. Demand rose 2.9 percent from a week earlier, while over the past four weeks it was 3.1 percent above a year ago.
“The market is really struggling here,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York. “Demand was strong. But it’s still worried about China manufacturing.”
August-delivery gasoline fell 0.43 cent to $3.0548 a gallon on volume that was 25 percent below the 100-day average. Gasoline’s 11 percent increase in July makes it the best performer in the Standard & Poor’s GSCI Index of 24 commodities.
Gasoline’s crack spread versus WTI widened $1.54 to $21.53 a barrel. The fuel’s premium to Brent gained 93 cents to $19.73.
Pump prices, averaged nationwide, fell 0.6 cent to $3.66 a gallon, Heathrow, Florida-based AAA said today on its website.