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Diesel Futures Gain on Speculation Storm Will Boost Demand

January 22, 2014

Jan. 22 (Bloomberg) -- Ultra low sulfur diesel futures rose on speculation that the season’s worst U.S. East Coast storm will boost demand and that distillate supplies fell last week.

New York, Washington and Philadelphia are blanketed under record snowfalls, bracing for temperatures near zero degrees Fahrenheit (minus 18 Celsius) and below tonight. U.S. distillate stockpiles, already 17 percent below the five-year average, are projected to fall another 500,000 barrels, according to the median estimate of 10 analysts in a survey by Bloomberg.

"Supplies have been tight, and now there’s the idea we have more heating demand," said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut.

Ultra low sulfur diesel for February delivery rose 1.14 cents, or 0.4 percent, to $3.0261 a gallon at 9:22 a.m. on the New York Mercantile Exchange. Trading volume was 77 percent above the 100-day average.

U.S. distillate stockpiles, including diesel and heating oil, fell 1.02 million barrels to 124 million in the week ended Jan. 10, Energy Information Administration data show. The EIA is scheduled to report last week’s inventories at 11 a.m. tomorrow.

Prices touched a high this morning of $3.0498, shy of yesterday’s intraday high of $3.0834.

"We need to show a decline in inventories tomorrow to keep this momentum," said McGillian.


Frigid Weather


The low in New York’s Central Park, where 11 inches (28 centimeters) of snow fell, a record for the date, is expected to reach 7 degrees Fahrenheit (minus 14 Celsius) tonight, according to the National Weather Service. Schools in Boston and Philadelphia closed for the day. New York City schools were open. Emergencies were declared in New York, New Jersey and Delaware.

"Inventories of heating oil are below the five-year average so the market is sensitive to the weather," said Phil Flynn, senior market analyst at Price Futures Group in Chicago.

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