ULSD climbs as COVID-19 reopenings foster regional stock draws

New York — Ultra low sulfur diesel futures rallied off early session lows midmorning June 10 as regional US inventory draws spurred optimism that economic restarts would support future demand.

At 1531 GMT, NYMEX July ULSD was up 78 points at $1.1625/gal and July RBOB was 85 points lower at $1.2018/gal.

Nationwide distillate inventories climbed 1.57 million barrels at 175.83 million barrels during the week ended June 6, the US Energy Information Administration data showed June 10. But the build was entirely concentrated on the Central Atlantic coast and New England, regions that have been slow in restarting their economies in the wake of COVID-19 lockdowns. In contrast, inventories turned lower in all other parts of the country, suggesting that diesel demand is recovering in those areas that are farther along in the reopening process.

Total product supplied for diesel, a proxy for demand, was up 590,000 b/d at 3.3 million b/d, EIA said.

In contrast, RBOB futures came under pressure following a counter-consensus build in US gasoline stocks in the week ended June 6.

US gasoline inventories were up 870,000 barrels on the week at 258.66 million in the week ended June 6, EIA said, pushing the nationwide supply overhang to its widest since mid-April at 10.4% above the five-year average.

Analysts surveyed by S&P Global Platts June 8 were calling for a 1.1 million-barrel draw in gasoline stocks.

Stockpiles on the US Atlantic Coast, which encompasses the NYMEX delivery point of New York Harbor, are now more than 15% above the five-year average after climbing nearly 900,000 barrels on the week at 75.11 million barrels.

In contrast, crude futures were little changed following the EIA report, as the market looked past an expected US crude build in the week ended June 6.

NYMEX July WTI was down 31 cents at $38.63/b and ICE August Brent was 28 cents lower at $40.90/b.

Total US crude supply increased 5.72 million barrels, EIA said, pushing stocks to an all-time record high at 538.07 million barrels. The reported build came in below American Petroleum Institute's June 9 estimates of an 8.4 million-barrel surge in US crude supply in the week ended June 6.

Further blunting the price impact, the build was concentrated almost entirely on the US Gulf Coast, where stocks climbed 6.87 million barrels as exports fell to a seven-month low at 2.44 million b/d. Inventories at the NYMEX delivery point of Cushing, Oklahoma, fell for the fifth straight week, declining 2.28 million barrels at 49.44 million barrels. Cushing stocks are now down 16 million barrels from their late-April peak.

US crude production continued its downward trajectory in the week ended June 6, with output falling 100,000 b/d at 11.1 million b/d.