New York Diesel Supply Crunch Boosts Premium to Nine-Month High

A shortage of diesel around New York Harbor and speculation that colder weather will boost heating oil demand has driven the premium for spot deliveries of the fuel to the highest level since March.

Ultra low sulfur diesel has more than doubled its premium in New York versus futures since the beginning of last week. Stockpiles in the mid-Atlantic region that includes New York are at the lowest level in six months. Forecast maps indicate December will end with a chill, with weather patterns that may allow Arctic air to flow into the central U.S. and then get bottled up in the Northeast.

Temperatures are expected to drop just as refineries from Philadelphia Energy Solutions’s complex to PBF Energy Inc.’s Delaware City plant are said to be recovering from upsets and as a Kinder Morgan Energy Partners LP pipeline shutdown curbed supplies in the region. New York’s diesel premium surged to a record earlier this year when cold in some areas plunged to record lows and choked natural gas pipeline flows into the region.

“There’s still a strong premium,” Eric Rosenfeldt, the vice president of supply and trading at Papco Inc. in Virginia Beach, Virginia, said by telephone today. “You’ve got Philadelphia Energy Solutions’ issues. You’ve got Delaware City issues. And your three-day weather forecast might look normal, but it looks like it’s getting colder after that.”

Cold Returns

MDA Information Systems LLC said in an e-mailed report last week that cold weather will return across much of the central and eastern U.S. in January. “Expectations are still in place for a buildup in upper-latitude blocking, supporting more cold as the month progresses,” the Gaithersburg, Maryland-based company said in its 60-day Earthsat weather outlook Dec. 10.

Diesel for spot delivery at New York Harbor was assessed at a 6-cent-a-gallon premium versus futures today, data compiled by Bloomberg at 11:53 a.m. East Coast time show. Ultra low sulfur diesel for January delivery fell 5.17 cents a gallon, or 2.6 percent, to $1.95 on the New York Mercantile Exchange at 1:39 p.m.

Philadelphia Energy Solutions’s refinery in Pennsylvania, the largest on the East Coast, restarted units last week after repairs, a company notice to the city showed. The complex is scheduled to shut more equipment in January for maintenance, a person familiar with the plan said in July. PBF’s Delaware City refinery reported flaring from Dec. 11 to Dec. 12.

Kinder’s 600,000-barrel-a-day Plantation pipeline, which carries fuel to the Washington area from the Gulf Coast, was shut for four days last week because of a spill on Dec. 8. “There were no customer impacts,” Melissa Ruiz, a spokeswoman for the company in Houston, said by e-mail today.

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