USGC diesel lowest in more than six years

OREANDA-NEWS. August 27, 2015. US Gulf coast diesel prices have fallen to the lowest level in more than six years as refiners continued to produce more than the domestic and export markets can absorb.

Prompt cycle Colonial diesel prices fell to 132.74?/USG on Monday, the lowest level since April 2009. Recent losses have followed narrow domestic arbitrages and a slowdown in exports, but persistent overproduction, multi-year high inventories and cheap crude have been depressing prices for months.

The arbitrage to ship diesel, heating oil and jet fuel from the Gulf coast to the northeast has been shut on and off in the past week, with New York Harbor's premium frequently falling below the cost of shipping. New York Harbor has been struggling with record high diesel inventories all summer, and exports out of the northeast have been stymied as well.

Midcontinent diesel values received a boost when BP's 410,000 b/d Whiting refinery lost a CDU nearly three weeks ago. But elevated prices in Chicago and Group Three did not result in increased shipment from the Gulf coast, as space on the Explorer and Magellan pipelines were mostly snapped up by gasoline shippers capturing a wider premium. BP has since restarted the CDU, causing midcontinent prices to fall.

Gulf coast diesel exports to Latin America have slowed down from peak levels in July. Europe has partly filled the gap in the past week. Three ULSD cargoes were seen fixed for the transatlantic route on Tuesday. The vessels, Maritina, Nave Capella and STI Yorkville, will load a total of 136,000 t of the fuel from the Gulf coast later this week. Up to 13 vessels were seen fixed from the Gulf to Europe last week, up from seven a week earlier. In addition, transatlantic freight rates have dropped to \\$14.79/t, the lowest level since April this year.

The country's total distillates supplied, a measure of apparent demand, fell to 3.6mn b/d during the week ended 21 August, down by 7.7pc from a week earlier, according to data from the Energy Information Administration. Distillates inventory rose by 5.1pc to 47.2mn bl last week, the highest level since May 2011. Inventories grew despite lower production, which fell by 3.4pc to 2.81mn b/d.