Diesel Futures Slides as Crude Retreats on Syria Weapons Talks

Ultra-low-sulfur diesel fell for the first week in five when crude slid as the U.S. and Russia began talks about Syria’s chemical weapons and amid speculation that the Federal Reserve may reduce its stimulus efforts.

Futures slipped 1.6 percent this week. Crude declined as U.S. Secretary of State John Kerry reported a “constructive” start to the talks, while giving no sign of a breakthrough. The Fed’s Open Market Committee is forecast to announce the timing for some tapering of bond purchases when it meets next week.

“We’re in that twilight zone between war and peace,” said Phil Flynn, senior market analyst at Price Futures Group in Chicago. “Add to that the uncertainty about tapering.”

Ultra-low-sulfur diesel for October delivery fell 0.27 cent to settle at $3.1137 a gallon on the New York Mercantile Exchange, after dropping as low as $3.0878. Trading volume was 22 percent below the 100-day average at 2:40 p.m.

President Barack Obama delayed a possible U.S. military intervention twice: first, on Aug. 31, to consult Congress, then on Sept. 10 to take up Russia’s proposal for international oversight of Syria’s chemicals arsenal.

“The market continues to swing back and forth on uncertainty over what’s going to play out in the Middle East and the outcome of the FOMC meeting,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

ULSD’s crack spread versus WTI gained 28 cents to $22.57 a barrel while the premium over Brent slipped 26 cents to $18 a barrel.

Gasoline Steady

Gasoline for October delivery rose 0.69 cent, or 0.3 percent, to $2.7696 a gallon on trading volume that was 17 percent below the 100-day average. Prices slipped 2.9 percent since Sept. 6, the second consecutive weekly loss. Futures have declined 8.2 percent in September.

Gasoline’s premium over crude increased for a second day as refineries shut units for planned seasonal maintenance, reducing supplies.

“Gasoline had fallen so much, there’s not that much downside,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London. “It’s already priced in that peak demand is over this year.”

The motor fuel’s crack spread versus West Texas Intermediate crude widened 68 cents to $8.11 a barrel while the fuel’s premium over Brent gained 14 cents to $3.54.

Pump prices, averaged nationwide, fell 1 cent to $3.54 a gallon, 32.9 cents below a year ago, Heathrow, Florida-based AAA said today on its website.

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