Ultra low sulfur diesel futures fell for the first time in a week, sliding from a three-week intraday high on speculation that imports will replenish supplies being drawn down during winter storms.
ULSD settled 0.3 percent lower as U.S. East Coast distillate imports rose in the week ended Jan. 10 and more cargoes are anticipated from Europe and Canada. Futures jumped as much as 2 percent earlier as winter storm warnings stretched from North Carolina to New Hampshire, indicating higher demand for heating fuel. Natural gas futures jumped to the highest price in almost four weeks.
“The focus for weather moved to natural gas and propane where supply tightness and the problems are,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Nobody is worried about weakness in heating oil.”
Ultra low sulfur diesel for February delivery fell 0.9 cent to settle at $3.0147 a gallon on the New York Mercantile Exchange. Trading volume was 89 percent above the 100-day average as of 3:19 p.m.
Prices touched $3.0834, the highest intraday price since Dec. 31, before retreating. February ULSD narrowed its premium to March futures by 0.61 cent to 6.36 cents, after touching 9.23 cents earlier.
“You’ve got prompt tightness because of the cold weather and that’s why it’s backwardated,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “The backwardation probably became too steep to be justified and that’s why it came off.”
Natural gas for February delivery advanced 10.5 cents to $4.431 per million British thermal on the New York Mercantile Exchange, the highest settlement price since Dec. 26. Spot gas at the Transco Zone 6 hub traded as high as $135 per million Btu on the IntercontinenalExchange.
East Coast distillate imports jumped 50 percent in the week ended Jan. 10 to 158,000 barrels a day, according to Energy Information Administration data.
The flow of cargoes continued in the week ended Jan. 16, with at least 1.09 million barrels arriving in New York and New England, according to U.S. Customs bill of lading data compiled by Bloomberg. Tankers arriving included Great Eastern, which delivered heating oil from Irving Oil’s Saint John refinery in Canada to ports in Maine, and Jag Pranav, which carried fuel to Boston and Portsmouth, New Hampshire, from Ventspils in Latvia.
Gasoil in Europe for February delivery settled at $919 per metric ton on the London ICE Futures exchange, and traded $913.25 at 2:30 p.m. New York time. That put gasoil almost 10 cents a gallon cheaper than ULSD in New York and about 19 cents below heating oil delivered to Boston, making New England an especially attractive destination for cargoes from Europe.
Diesel’s crack spread versus West Texas Intermediate crude, a rough measure of refining profitability, narrowed $1 to $31.63 a barrel. The premium over European benchmark Brent fell 50 cents to $17.22 a barrel.
Gasoline for February delivery advanced 0.02 cent to settle at $2.6206 a gallon on trading volume that was 7.9 percent above the 100-day average.
The motor fuel’s crack spread versus WTI narrowed 61 cents to $15.08 a barrel while its premium to London-traded Brent crude declined 28 cents to $3.87.
The average U.S. pump price fell 0.5 cent to $3.279 a gallon, according to Heathrow, Florida-based AAA. Prices are the lowest since Dec. 25 and 2.6 cents below a year ago.