ULSD Surges as Central Banks Signal Lower Rates to Spur Growth

Ultra-low-sulfur diesel futures gained for the first time in five days as U.S. consumer confidence climbed and some central banks indicated they planned to continue measures to promote economic growth.

Diesel rose 1.7 percent after the Conference Board’s index rose today to 76.2, the strongest since February 2008. Japanese Economy Minister Akira Amari told reporters in Tokyo that Bank of Japan Governor Haruhiko Kuroda plans to pursue quantitative and qualitative easing to support the economy. The central banks of Hungary and Israel reduced borrowing costs.

“The big story is that central banks are continuing to keep low interest rates, and as a result we’re seeing rising commodity prices,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

ULSD for June delivery advanced 4.97 cents to settle at $2.9066 a gallon on the New York Mercantile Exchange. Trading volume at 3:19 p.m. was 15 percent below the 100-day average.

July ULSD’s crack spread versus WTI crude oil widened $1.22 to $26.96 a barrel. July ULSD’s premium over Brent was little changed at $17.71 a barrel.

Hungary’s central bank cut the main interest rate for a 10th month to a record low 4.5 percent. The Bank of Israel reduced borrowing costs for a second time this month to 1.25 percent, the lowest in more than three years.

Consumer Confidence

The consumer confidence index increase exceeded the highest estimate in a Bloomberg survey of economists. The median forecast called for an increase to 71.2. The index had a revised level of 69 in April.

Gasoline for June delivery rose 1.38 cents, or 0.5 percent, to $2.8528 a gallon on the Nymex. Trading volume was 10 percent below the 100-day average.

Gasoline’s crack spread versus West Texas Intermediate slipped 13 cents to $24.50 a barrel. July gasoline’s premium over July Brent shrank by 88 cents to $15.28.

Gasoline at the pump, averaged nationwide, rose by 0.5 cent to $3.626 a gallon, AAA said on its website today. Prices have dropped for six days in a row.

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