Diesel Drops as Crude Tumbles After Report Shows Supply Increase

Oct. 21 (Bloomberg) -- Ultra-low-sulfur diesel fell as crude tumbled after a government report that oil supplies jumped to a three-month high.

Diesel slid 0.8 percent. West Texas Intermediate crude sank 1.6 percent to $99.22 a barrel after the Energy Information Administration reported that crude stocks rose 4 million barrels in the week ended Oct. 11. Distillate inventories declined 1.8 million barrels to 124.2 million, the lowest level in three months. A 2 million-barrel withdrawal was projected in a Bloomberg survey.

“It’s being dragged down by crude,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “The market was not particularly surprised at the drawdown in products because there’s turnarounds going on.”

Ultra-low-sulfur diesel for November delivery fell 2.48 cents to settle at $3.0106 a gallon on the New York Mercantile Exchange. Trading volume was 12 percent below the 100-day average at 2:57 p.m.

The EIA report, scheduled to be released Oct. 17, was delayed because federal workers were furloughed for 16 days during a partial government shutdown. The report for supplies in the week ended Oct. 18 will be released on Oct. 23.

ULSD’s premium versus WTI widened 55 cents to $27.23 a barrel. The crack spread over Brent sank 74 cents to $16.66.

Gasoline Stockpiles

Gasoline stockpiles shrank 2.57 million barrels to 217.3 million, the biggest drop in eight weeks. Analysts estimated a 1-million-barrel decline. Supplies in PADD 1, which includes the New York Harbor delivery point for Nymex futures, slipped 1.29 million barrels to 57.1 million.

Gasoline for November delivery fell 1.94 cents, or 0.7 percent, to $2.6538 a gallon on trading volume that was 60 percent below the 100-day average.

Gasoline crack spreads widened as Scotland’s only refinery is shut because of a strike, which could reduce imports from Europe just as seasonal maintenance is pinching supplies along the U.S. East Coast.

The motor fuel’s crack spread versus WTI rose 78 cents to $12.24 a barrel. The spread has more than doubled since sliding to $5.68 on Oct. 4, the smallest margin since November 2010.

“That’s a reflection of inventory levels and continued maintenance,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York.

The premium to Brent fell 45 cents to $1.24 a barrel.

Pump prices, averaged nationwide, fell 0.4 cent to $3.349 a gallon, Heathrow, Florida-based AAA said today on its website. Prices are 32.7 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