Diesel Futures Tumble to Three-Week Low on Record U.S. Output

Ultra low sulfur diesel futures sank to a three-week low as record U.S. distillate output swelled supplies and as Brent crude and gasoil fell in London.

Prices slipped 1.4 percent. Production of distillate fuel, including heating oil and diesel, rose 3 percent to a record 5.26 million barrels a day as refinery rates jumped 0.2 percentage point to 92.6 percent, the highest level for this time of year since 2004, the U.S. Energy Information Administration reported yesterday.

“The market will be weighed down by increasing product supplies and record utilization rates for this time of the year,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston.

Ultra low sulfur diesel for January delivery fell 4.11 cents to $2.9801 a gallon on the New York Mercantile Exchange, the lowest settlement since Nov. 20. Trading volume was 6.5 percent above the 100-day average as of 3:09 p.m.

“Production was at a record high and that is really weighing on the market,” said Amrita Sen, chief oil market strategist at Energy Aspects Ltd., a research company in London.

Supplies of distillates increased 4.54 million barrels to 118.1 million, the highest level in six weeks.

Brent crude for January settlement fell 0.9 percent on the ICE Futures Europe exchange, reducing feedstock costs for refiners in Europe and along the U.S. East Coast.

Gasoil Declines

Gasoil for January delivery, the pricing basis for European diesel, dropped $7 to settle at $925.50 per metric ton on ICE after PJK International BV reported that gasoil stockpiles in independent storage at Europe’s Amsterdam-Rotterdam-Antwerp oil-trading hub rose 2.6 percent in the week to today.

ULSD’s premium over West Texas Intermediate, a rough measure of refining profitability, narrowed $1.79 to $27.66 a barrel. The crack spread versus European benchmark Brent fell 70 cents to $16.49.

Gasoline sank to a four-week low as inventories have risen to the highest seasonal level in two decades. Total gasoline supplies jumped 6.72 million barrels last week to 219.1 million while demand slid to the lowest level in almost seven months.

Gasoline for January delivery slipped 2.63 cents, or 1 percent, to $2.6348 a gallon, the lowest settlement since Nov. 13. Trading volume was 11 percent below the 100-day average.

Gasoline’s crack spread versus WTI narrowed $1.16 to $13.16 a barrel. The fuel’s premium to Brent fell 7 cents to $1.99 a barrel.

The average U.S. pump price fell 0.4 cent to $3.253 a gallon, the fourth consecutive decline, Heathrow, Florida-based AAA said today.

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