Diesel futures declined on speculation that demand for heating fuel will fall as temperatures are projected to climb in the U.S. Northeast.
Prices slipped 1.7 percent as the U.S. Climate Prediction Center said the eastern U.S. will have higher-than-normal temperatures from Feb. 17 to Feb. 23. Imports may replenish supplies in PADD 1B, which includes New York, the delivery point for futures contracts, where stockpiles are the lowest since May 2003, according to Energy Information Administration data.
“The expectation is that as we go through February, the effects of milder weather and resupply will put pressure on prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.
Ultra low sulfur diesel for March delivery fell 5.22 cents to settle at $2.9981 a gallon on the New York Mercantile Exchange. Trading volume was 59 percent above the 100-day average as of 2:58 p.m.
The premium of front-month ULSD over gasoil on ICE Futures Europe exchange reached almost 37 cents a gallon on Jan. 31, making exports to the U.S. more attractive.
The U.S. imported 299,000 barrels a day of distillate into the U.S. East Coast in the week ended Jan. 31, 72 percent above the five-year average, according to EIA data.
In the New York Harbor spot market, diesel for prompt delivery was 15.5 cents above Nymex futures as of 3:39 p.m., down from 35 cents earlier today and from a record 42 cents last week, according to data compiled by Bloomberg.
“There was a price rally, there was definitely a shortage,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “The average of weekly imports of distillates in coming weeks could be as high as 400,000 to 450,000 barrels a day, with imports coming from Europe and Russia.”
Diesel’s crack spread versus WTI narrowed $2.37 to $25.86 a barrel. The premium over European benchmark Brent fell $1.25 cents to $17.29 a barrel.
March gasoline declined 2.41 cents, or 0.9 percent, to settle at $2.7248 a gallon on volume that was 6.3 percent below the 100-day average.
The motor fuel’s crack spread versus West Texas Intermediate, a rough measure of refining profitability, narrowed $1.19 to $14.38 a barrel. Its premium to London-traded Brent crude fell 7 cents to $5.81.
The average U.S. pump price increased 1 cent to $3.294 a gallon, according to data from Heathrow, Florida-based AAA. It was the third consecutive increase. Prices are 28.8 cents below a year earlier.