Bloomberg News

Midwest Diesel at 3-Year High After Demand Depletes Pipeline

November 09, 2011

(Updates with diesel strengthening in Midwest in first paragraph.)

Nov. 9 (Bloomberg) -- Diesel in the Midwest rose after demand from agriculture and drilling left shippers struggling to fulfill pipeline volume requirements.

The Magellan Midstream Partners LP pipeline system, which runs to the region from the Gulf, adjusted minimum requirements to ship on the line, said Lewis Adam, president of ADMO Energy LLC, a supply consultant in Kansas City.

“Since October was a high demand period, most everyone had increases in their system linefill," Adam said. "If they don’t have those minimums filled, they’re cut off.”

The premium for ultra-low-sulfur diesel in the Midwest, or Group 3, rose 5.75 cents to a premium of 15.5 cents versus heating oil futures traded on the New York Mercantile Exchange at 2:46 p.m., according to data compiled by Bloomberg. It’s the highest level since Nov. 17. Prompt delivery increased 4.36 cents to $3.2572 a gallon.

High agriculture and drilling pushed demand higher, Adam said. The surge in prices may break early next week, he said.

Gasoline in New York strengthened after inventories declined and imports of the fuel fell to the lowest level in three weeks.

Gasoline supplies in the U.S. East Coast slipped 1.73 million barrels last week to 51.1 million, according to the Energy Department. Imports to the region dropped 25 percent to 547,000 barrels a day, the government said.

The premium for conventional gasoline to be blended with ethanol, or CBOB, in New York Harbor gained 0.25 cent to 5.25 cents a gallon versus futures. Prompt delivery fell 5.97 cents to $2.6967 a gallon.

CVR Energy Inc. is starting the Coffeyville refinery in Kansas following planned work, Steve Eames, a company spokesman, said in a telephone interview.

The spread for conventional, 87-octane gasoline in the Gulf Coast fell 1 cent to a discount of 3.5 cents a gallon.

Total SA restarted a fluid catalytic cracker at its Port Arthur, Texas, refinery, two people familiar with the plant’s operations said yesterday.

--Editors: Richard Stubbe, Charlotte Porter

To contact the reporter on this story: Paul Burkhardt in New York at pburkhardt@bloomberg.net.

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net.


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