US demand for traditional heating oil has waned ahead of the impending switch to lower-sulfur products in several Northeast states, sending differentials for the product into decline.
The vast majority of US heating oil demand lies in the Northeast, where several states -- including the high-demand Massachusetts, Connecticut and New Jersey -- are tightening sulfur specifications for home heating oil to less than 500 ppm sulfur on July 1.
But the market has already lost interest in traditional heating oil, which has less than 2,000 ppm sulfur, traders said.
"Demand is nonexistent," one trader said. "I don't see anything changing. Until the arbitrages open out of New York Harbor, heating oil is likely to get weaker."
Any impact from the sulfur switch is already being factored into the market, a second trader said, as some buyers have already begun preparing for the 2014 winter demand season with lower-sulfur product.
US Gulf Coast traditional heating oil fell to NYMEX July ULSD futures minus 14 cents/gal Tuesday, 1.25 cents/gal less than Monday. The same product on the Atlantic Coast fell 25 points to minus 10 cents/gal, the lowest level since minus 10.25 cents/gal on September 11.
Platts assessed the NYMEX July ULSD futures contract up 87 points to $3.0491/gal at 3:15 pm EDT (1915 GMT).
