Diesel Climbs as Inventories Drop Amid Rising U.S. Demand

Nov. 20 (Bloomberg) -- Diesel climbed to the highest level in almost three weeks after a government report showed U.S. inventories slumped to a one-year low amid a surge in demand.

Nationwide supplies of the fuel tumbled 4.8 million barrels to 112.5 million in the week ended Nov. 15, the lowest level since Nov. 23, 2012, according to U.S. Energy Information Administration data. Supplies were forecast to drop 280,000 barrels, the median of 11 analyst estimates in a Bloomberg survey. The amount of diesel and heating oil supplied to the market rose 14 percent to 4.33 million barrels a day.

“What’s surprising is the extent of the draw on distillate and the substantial increase in demand,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “It’s supporting the price action that we’re seeing today.”

Ultra-low-sulfur diesel for December delivery rose 4.87 cents, or 1.7 percent, to $2.9545 a gallon on the New York Mercantile Exchange, the highest settlement since Oct. 31. Trading volume was 27 percent above the 100-day average at 3:21 p.m. Futures are down 3 percent in 2013.

Distillate production at refineries in the U.S. slipped 40,000 barrels a day to 4.91 million last week, the first decline in six weeks, according to EIA data. Utilization was little changed as Phillips 66’s Bayway, New Jersey, refinery, the closest plant to New York Harbor, the delivery point for Nymex diesel and gasoline futures, continued work.

ULSD’s crack spread to WTI gained $2.06 to $30.76 a barrel, while the price gap versus Brent rallied for a second day, climbing 81 cents to $15.96.

More Exports

Diesel stockpiles may be falling as more exports head for Europe and the winter weather boosts demand, according to Robert Campbell, New York-based head of oil products research at Energy Aspects Ltd.

Almost 40 Medium-Range tankers carrying refined products left the U.S. Gulf Coast in the week ended Nov. 15, 28 percent more than the previous week, shipbroker Charles R. Weber said in a weekly note. Demand is expected to remain “robust on further exports” and continued distillate volumes to Europe, according to the note.

“There’s talk of a lot of product moving to Europe, we’re seeing tighter supplies and with the winter weather, we’re seeing strength in diesel,” Campbell said by phone today.

Gasoline futures for December delivery climbed 2.35 cents, or 0.9 percent, to $2.663 a gallon after the EIA reported that motor fuel supplies fell 345,000 barrels to 20.9 million in the week ended Nov. 15, the lowest level in almost a year. Volume was 1.4 percent below the 100-day average.

U.S. pump prices, averaged nationwide, rose 0.3 cent to $3.212 a gallon, Heathrow, Florida-based AAA said today. That’s 20 cents below a year ago.

The fuel’s crack spread to West Texas Intermediate oil widened $1 to $18.52 a barrel. Gasoline’s premium to European benchmark Brent oil slipped 5 cents to $3.06.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net