Diesel Falters as El Nino Takes Bite From US Winter Demand
Diesel is the cheapest versus gasoline for this time of year in at least a decade as inventories surge and mild temperatures reduce heating demand.
Ultra-low-sulfur diesel on the New York Mercantile Exchange settled at 0.72 cent a gallon more expensive than gasoline Dec. 9, compared with the previous low for Dec. 9 of 5.2 cents in 2009. Diesel typically is pricier than gasoline in the winter as more fuel is burned to heat homes, on top of normal transportation demand.
Distillate supplies in the United States grew by 5 million barrels last week, according to the Energy Information Administration, pushing supplies to the highest level for this time of year since 2010. A strong El Nino this winter is expected to keep temperatures above average in the Northeast, where a majority of heating oil demand is located. The typical household that uses oil will burn about 533 gallons this winter, down from 609 a year ago, according to EIA.
“Traditionally, the industry knows that heating oil demand goes up in the winter and, as a result, it will be pulling inventories,” said Andy Lipow, president of Lipow Oil Associates. “As we go into this winter, though, we have total distillate inventories about 25% higher than last year, at the same time that weather forecasters are calling for a mild winter.”
