OVERSUPPLY MAY DEPRESS DIESEL PRICES

OVERSUPPLY MAY DEPRESS DIESEL PRICES

Bulging supplies of low-sulfur diesel fuel in New York harbor likely will force prices downward in the short term, traders said, as the market rights itself after initial supply uncertainties.

Prices rose following the Oct. 1 Environmental Protection Agency deadline for the mandated use of the fuel by on-road vehicles.Low-sulfur diesel fuel in New York was widely offered Wednesday for 2 cents above the December heating oil contract on the New York Mercantile Exchange.

Prices for the fuel, which has a sulfur content no higher than 0.05 percent by weight, have eroded steadily during the past week from as much as 3.35 cents above the underlying futures contract.

December heating oil futures settled Wednesday up 0.10 cents, to 52.47 cents a gallon.

A trader for a Wall Street firm said the correction was inevitable and overdue because "prices were overdone on the upside" due to the uncertainties of the supply picture connected to the Oct. 1 requirement.

Coastal Corp. and Chevron Corp. continue to supply low-sulfur diesel fuel from Philadelphia-area refineries, said a trader for a major international oil company.

Other companies, including Irving Oil Ltd. and Vitol, are said to be trying to market Canadian low-sulfur cargoes in the Northeast.

American Petroleum Institute data released Tuesday showed national low- sulfur distillate stocks rose 2.4 million barrels, to 57.315 million barrels during the week ended Oct. 29.