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Diesel Futures Advance as Brent Surges Amid Supply Disruptions

Ultra-low-sulfur diesel jumped to a two-week high, following Brent crude and gasoil higher amid supply disruptions in Africa and the Middle East.

Diesel gained in the longest advance since April 25 as Brent rose 0.8 percent and gasoil touched the highest since February on the London ICE Futures exchange. Egypt’s army-backed government declared a state of emergency. Libya’s Waha Oil Co. halted almost all of its 340,000-barrel-a-day output as tanks reached full capacity amid port closures.

“The European market is getting supported by the unrest we’re seeing in Egypt and on the back of supply disruptions in Libya, Iraq and the Sudan,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Ultra-low-sulfur diesel for September delivery rose 2.5 cents, or 0.8 percent, to $3.0728 a gallon on the New York Mercantile Exchange. The gain was the fifth in a row. Trading volume was 36 percent below the 100-day average at 2:54 p.m.

Diesel advanced as gasoil rose $11.25, or 1.2 percent, to $937.25 a metric ton. Analysts at Petromatrix and JBC Energy have estimated that European refiners will cut production amid declining margins and because of seasonal maintenance.

“Gasoil is up and ULSD has been attached to it at the hip,” said Mark Anderle, a trader at wholesaler Truman Arnold Cos. in Dallas.

ULSD’s crack spread versus West Texas Intermediate crude widened 57 cents to $21.73 a barrel. The premium over Brent rose 14 cents to $17.95 a barrel.

Gasoline Stable

President Barack Obama condemned the violence against Egyptian civilians, canceled a scheduled joint military exercise with Egypt and directed his staff to assess whether further steps are warranted.

Members of Egypt’s Muslim Brotherhood torched government headquarters in Giza and called for rallies nationwide as the death toll from a crackdown on the supporters of ousted President Mohamed Mursi rose above 500.

Gasoline futures were little changed after fluctuating during the trading day amid speculation that stronger U.S. labor and housing markets data increases the odds the Federal Reserve will soon taper its bond-buying program.

First-time jobless claims fell to the lowest level since 2007 last week, Labor Department data shows. The National Association of Home Builders/Wells Fargo index of builder confidence climbed to 59 from a revised 56 in July, the Washington-based group reported today. The central bank has said it is monitoring the economy to determine when it will taper stimulus efforts.

Tapering Concern

“Good news is bad news today,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Right now, the biggest fear is tapering and good economic news increases the changes for tapering.”

Gasoline inventories are seasonally the highest since 2010 even after supplies last week fell 1.17 million barrels, according to Energy Information Administration data.

Gasoline’s discount to September ULSD widened 2.35 cents to 8.83 cents.

“Gasoil is strong in Europe and distillate looks better than gasoline,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York. “We had draws in gasoline, but gasoline season is over and we have plenty of gasoline.”

Gasoline for September delivery rose 0.15 cent to $2.9845 a gallon on trading volume that was 29 percent below the 100-day average at 3:03 p.m.

The motor fuel’s crack spread versus West Texas Intermediate crude narrowed 42 cents to $18.02 a barrel. Gasoline’s premium over Brent slid 85 cents to $14.24 a barrel.

Pump prices, averaged nationwide, were unchanged at $3.539 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are the lowest since July 10. The average is 17 cents below a year earlier.

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