Diesel Surges in New York as Cold Boosts Demand, Slows Cargoes

Diesel futures jumped the most in more than five years as cold weather in the Northeast drove up heading demand just as refinery outages sapped supply. CME Group Inc. raised margins for trading the contract to the highest since 2011.

The March contract surged as much as 7.2 percent on Friday as Delta Air Lines Inc. shut units at its Trainer refinery in Pennsylvania and Philadelphia Energy Solutions had an upset at the largest complex on the East Coast. Natural gas pipelines are meanwhile limiting flows as cold weather spreads through the region, and ice buildup has delayed some tankers from unloading fuel at New York Harbor. That has added to pressure on heating oil suppliers.

“This is a result of the natural gas curtailments that continue through the region,” said Andy Lipow, president of Lipow Oil Associates LLC in Houston. “Compounding the problem is the fact that the Delta Trainer refinery shut down units.”

Ultra low sulfur diesel for March delivery surged 11.8 cents, or 5.9 percent, to settle at $2.1118 a gallon on the New York Mercantile Exchange. It was the biggest-percentage jump since June 1, 2009. The front-month contract’s premium to second-month futures widened to 20.17 cents, the highest level in more than a year. Diesel is traded as a proxy for heating oil.

CME, the Chicago-based exchange operator that runs the Nymex, raised the initial margins for the ULSD contract by 9.3 percent to $5,500 for speculators, the highest since the exchange set it at $5,830 in December 2011, a notice posted on the company’s website on Friday shows.

“Looks like the gaming table just got a little richer,” Eric Rosenfeldt, the vice president of supply and trading at Papco Inc. in Virginia Beach, Virginia, said by phone on Friday.

Spot diesel for physical delivery at New York Harbor surged 3.5 cents a gallon to a premium of 7.25 cents over futures, the biggest since March 2014, data compiled by Bloomberg at 4:03 p.m. New York time show.

Natural gas for March rose 10.5 cents to $2.939 per million British thermal units on the Nymex.

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