Bloomberg News

Diesel Gains as Cold Boosts Heating and Power Generation Demand

January 24, 2014

Diesel futures rose for a third day as frigid weather across the northeast U.S. boosted demand for heating fuel and spurred more oil-fired power generation with distillate inventories in the New York Harbor area at the lowest level in almost six years.

Prices climbed as colder temperatures will grip most of the eastern U.S. and Canada through the start of February. The region is expected to have readings about 8 degrees Fahrenheit (4 Celsius) below normal through Feb. 2, said Matt Rogers, president of Commodity Weather Group LLC in Bethesda, Maryland. ISO New England said oil-fired plants accounted for one-quarter of the region’s power today.

“Utilities are really starting to buy a lot of distillate because of regional natural gas shortages,” Tom Finlon, director of Energy Analytics Group Ltd., said by phone from Jupiter, Florida. “They’re turning to distillate generation and that’s blowing out prices.”

ULSD for February delivery advanced 1.09 cents, or 0.4 percent, to $3.0874 a gallon on the New York Mercantile Exchange. Trading volume was 41 percent above the 100-day average as of 10:31 a.m.

The February contract’s premium to March futures widened 1.47 cents to 10.02 cents a gallon, the highest for this day since 2000, indicating concern that available supplies are limited. February diesel and gasoline contracts will expire at the end of trading on Jan. 31.

Refinery Operations

Cold weather has already hindered refinery operations, including at PBF Energy Inc. (PBF:US)’s 185,000 barrel-a-day Paulsboro, N.J. site this week, and continued cold may disrupt other refineries, driving prices higher. Refinery utilization last week fell 3.5 percentage points to a 13-week low of 86.5 percent.

“If the arctic temperatures reach the Gulf Coast and stay cold, you’d expect there will be significant refinery outages that would make the heating oil shortage that much worse,” Finlon said.

Gasoline retreated after the EIA reported that inventories of the motor fuel rose 2.12 million barrels to 235.3 million, the highest since February 2011. The increase came as East Coast imports of gasoline jumped 30 percent to 500,000 barrels a day.

February-delivery gasoline fell 1.78 cents, or 0.7 percent, to $2.644 a gallon on volume that was 7.3 percent below the 100-day average.

The average U.S. pump price rose 0.1 cent to $3.288 a gallon, the third consecutive increase, according to data from Heathrow, Florida-based AAA.

To contact the reporters on this story: Eliot Caroom in New York at ecaroom@bloomberg.net; Brian K. Sullivan in Boston at bsullivan10@bloomberg.net

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


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Companies Mentioned

  • PBF
    (PBF Energy Inc)
    • $24.0 USD
    • -0.16
    • -0.67%
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