Diesel Fuel Rallies in New York on Outages, More Distillate Use

Diesel fuel strengthened in New York after unplanned outages at area refineries cut production and on speculation more distillate fuel was being used to power natural gas plants in the U.S. Northeast.

Ultra low sulfur diesel climbed 0.38 cent to a premium of 2.38 cents a gallon to New York Mercantile Exchange futures at 3:37 p.m., near the nine-month high of 2.5 cents reached Jan. 3, according to data compiled by Bloomberg.

The differential rallied after PBF Energy Inc. shut most processing units after steam loss at the Paulsboro, New Jersey, refinery and an island-wide power failure in Newfoundland, Canada, forced the shutdown of Korea National Oil Corp.’s Come by Chance refinery. PBF also reported flaring at its Delaware City, Delaware site early today.

The three plants have a combined capacity of 482,200 barrels a day, according to data compiled by Bloomberg. Delta Air Lines Inc., the only airline to operate a U.S. refinery, is also carrying out turnaround work on a crude unit and isocracker at its 185,000-barrel-a-day Trainer, Pennsylvania, site. An isocracker converts heavy feedstocks into high quality middle distillates and lube oil base stocks.

Output of finished motor gasoline in the region fell 166,000 barrels to 2.79 million barrels a day in the week ended Dec. 27, while diesel production climbed 80,000 to 376,000 barrels a day, according to the latest weekly data from U.S. Energy Information Administration.

The Switch

Frigid air, which clamped down on much of the U.S. for a second day today, boosted heating-fuel use and prompting some utilities to turn on units fueled by petroleum products, which are usually more expensive than natural gas.

Plants powered by oil accounted for 15 percent of generation in the six-state area stretching from Maine to Connecticut, compared with none yesterday, according to ISO New England Inc., a grid operator.

“Some natural gas customers have been required to switch to distillate fuel oil so there’s been more use than normal from customers in the Northeast,” said Michael Trunzo, president and chief executive officer of the New England Fuel Institute, an organization representing heating oil, propane, biofuel and motor fuel dealers.

The 3-2-1 crack spread in the New York Harbor, a rough measure of refining margins based on Brent oil in Europe, gained 83 cents to $9.46 a barrel, the first increase in four days, according to data compiled by Bloomberg.

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