By Stephanie Kelly
NEW YORK (Reuters) – U.S. ultra-low sulfur diesel was the latest product refined from crude oil to take a hit in its cash market last week, after refiners boosted production in a bid to flee poorer margins for other products more affected by coronavirus fallout.
Refining margins for gasoline and jet fuel have tanked because of decreased demand for transportation fuels as the disease outbreak has forced businesses to close and governments to push residents to avoid travel and public places.
For most of last week, diesel margins held up relatively well, as both trucking and farming, two sectors that rely on diesel, continued operating. But refiners’ move to turn to diesel is starting to cause oversupply in some regions, causing cash prices to fall, market participants said.
Cash prices for diesel in Chicago
Elsewhere in the Midwest
That could augur for declines in diesel refining margins
The coronavirus has curbed travel and driving as governments urge people to stay indoors.
Underscoring falling demand, Colonial Pipeline Co said on Thursday it would cut volumes on its primary lines delivering gasoline and diesel fuel to the U.S. East Coast from the Gulf Coast.
Some say the only cure for the refining industry right now would be run cuts, leading to less supply and a potential salve for margins.
“If Colonial is the second most important source of supply and they aren’t full – then the demand destruction is biting,” said Sandy Fielden, director of oil and products research at Morningstar in Austin, Texas.
(Reporting by Stephanie Kelly; Editing by Tom Brown)
