Bloomberg News

Chicago Diesel Weakens to the Lowest Level Since at Least 2006

December 29, 2011

Dec. 29 (Bloomberg) -- Diesel in the Chicago area slid to the weakest level versus futures since at least 2006 as higher refinery production increased stockpiles.

Distillate inventories in the U.S. Midwest have risen five of the past six weeks, gaining 22 percent to 28.8 million barrels, according to Energy Department data.

Refiners increased output of diesel and heating oil in the region to a record high to capture higher margins, reaching 1.16 million barrels a day in the week ended Dec. 2, according to department data.

January-delivery heating oil, traded as diesel surrogate, settled at a $22.89-a-barrel premium to crude oil on the New York Mercantile Exchange.

“With the huge refinery margins, refiners have been optimizing diesel production all year,” Lewis Adam, president of ADMO Energy LLC, a supply consultant in Kansas City, Missouri, said in an interview.

Chicago ultra-low-sulfur diesel’s discount to futures widened 3 cents to 24 cents a gallon, the biggest gap since at least July 2006, according to data compiled by Bloomberg. Prompt delivery fell 1.02 cents to $2.681 a gallon.

The same fuel in the Midcontinent weakened 0.25 cent to a 6-cent discount to futures, and in the Gulf Coast, diesel was unchanged at an 0.88-cent premium.

Ultra-low-sulfur diesel in New York Harbor lost 0.75 cent to a 3.25-cent premium.

U.S. distillate stockpiles rose 1.21 million barrels to 140.4 million in the week ended Dec. 23, the department reported today. Demand fell 14 percent to 3.8 million barrels a day, the lowest level in four weeks.

--Editors: David Marino, Richard Stubbe

To contact the reporter on this story: Barbara J. Powell in Dallas at

To contact the editor responsible for this story: Bill Banker at

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