ULSD Slips to Three-Week Low as China’s Manufacturing Slows

Ultra-low-sulfur diesel slipped to a three-week low as a slowdown in China’s manufacturing raised concern that global demand for distillates will decline.

ULSD fell 0.5 percent after China’s manufacturing contracted in May for the first time in seven months, indicating slowing economic growth in the world’s second-largest energy consumer. Gasoil fell in Europe, reducing the incentive to export distillates to that region.

“China’s growth, the minute it starts to disappear, the longs who have piled into the market have to think if they want to expose themselves to risk,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Ultra-low-sulfur diesel for June delivery dropped 1.36 cents to settle at $2.86 a gallon on the New York Mercantile Exchange on trading volume that was 12 percent above the 100-day average at 3:19 p.m.

July ULSD’s crack spread versus West Texas Intermediate crude oil shrank by 60 cents to $25.61 a barrel. July ULSD’s premium over Brent fell 52 cents to $17.36 a barrel.

Gasoil for delivery in June on the ICE Futures Exchange in London sank 2 percent to settle at $849.50 a metric ton.

Gasoline for June delivery rose 0.87 cent to settle at $2.8281 a gallon in trading volume that was 6.2 percent below the 100-day average. Futures touched a low of $2.7882 before strengthening along with crude when equities advanced.

Crude Futures

Crude oil for July delivery settled at $94.25 a barrel, down 3 cents, after touching $92.21. The Standard & Poor’s 500 Index was down 0.3 percent at 3:23 p.m. after declining as much as 1.2 percent.

“Equities were due to correct and they took crude with them,” said Jim Colburn, a vice president and energy options broker at Jefferies Bache LLC in New York.

Gasoline’s crack spread versus WTI widened by 37 cents to $24.20 a barrel. July gasoline’s premium over July Brent gained 46 cents to $15.98.

Gasoline at the pump, averaged nationwide, fell 0.1 cent to $3.659 a gallon, Heathrow, Florida-based AAA, the nation’s largest motoring organization, said today on its website. Prices are 1.9 cents below a year earlier.

Before it's here, it's on the Bloomberg Terminal.