ULSD Futures Slides on U.S. Payroll Data; Crack Spread Narrows

Ultra-low sulfur diesel slid to a seven-day low after U.S. employers hired fewer workers in March, boosting concern that economic growth and fuel use are slowing. The crack spread on the New York Mercantile Exchange narrowed.

Futures capped the biggest three-day decline since Sept. 18 as Labor Department figures showed the smallest payroll growth in nine months and the jobless rate at a four-year low because the labor force is shrinking. Two reports earlier this week showed manufacturing and service sectors expanded more slowly. ULSD’s crack spread versus WTI crude fell $1.70 to $29.51 a barrel, the smallest since March 20.

“Today’s unemployment number is horrible,” said Stephen Schork, president of the Schork Group Inc., an energy advisory company in Villanova, Pennsylvania. “You’re marrying lousy economic headlines with the current trend we’ve seen in manufacturing. Distillate is more of a link to the industrial than gasoline, whose use tends to be discretionary.”

Ultra-low-sulfur-diesel for May delivery fell 5.38 cents, or 1.8 percent, to $2.9098 a gallon on the New York Mercantile Exchange, the lowest settlement since March 26. Trading volume was 47 percent above the 100-day average at 3:16 p.m. The May contract declined 4.5 percent this week after the last heating oil contract expired March 28.

The fuel’s crack spread versus Brent narrowed 4 cents to $18.09. Brent for May delivery fell $2.22 to $104.12 a barrel on the London ICE Futures Europe Exchange and the front-month contract traded below the second month for the first time in nine months.

Brent Weakness

“The outright weakness of the Brent market is affecting products,” said Andrew Lebow, a senior vice president at Jefferies Bache LLC in New York.

ULSD also fell as gasoil in Europe for May delivery on the ICE Futures Europe exchange fell 0.9 percent to $880 a metric ton, the lowest settlement since July 13.

“Gasoil has been under tremendous pressure the last few weeks,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

Payrolls grew by 88,000 workers last month, after a revised 268,000 gain in February that was higher than first estimated, Labor Department figures showed. The jobless rate fell to 7.6 percent from 7.7 percent. The labor force participation rate fell to 63.3 percent, the lowest since May 1979.

Factory Index

The Institute for Supply Management’s factory index fell to 51.3 from an almost two-year high of 54.2 in February, the Tempe, Arizona-based group’s figures showed on April 1. The ISM index of U.S. non-manufacturing businesses, which covers almost 90 percent of the economy, fell to 54.4 in March from 56 in the prior month.

“The entire complex is being weighed down by the economic concerns,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant.

Gasoline for May delivery fell 3.51 cents, or 1.2 percent, to settle at $2.8636 a gallon on volume that was 6.4 percent above the 100-day average. Futures lost 7.8 percent this week, the biggest weekly drop since October.

Gasoline at the pump, averaged nationwide, fell 1.1 cents to $3.625 a gallon, AAA said today on its website. Prices are 31.1 cents below a year earlier, when prices reached a 2012 high of $3.936.

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