US Cash Products-USG diesel falls further

NEW YORK, Nov 4 (Reuters) - U.S. Gulf Coast diesel fell further despite a drawdown in distillate inventories as low demand and a regional overhang of product continues to push differentials lower, traders said on Wednesday.

"No one is motivated to buy," said one Gulf Coast trader who differentials to fall more.

Despite a fall in refinery U.S. utilization, production of ultra-low sulfur diesel rose in the Gulf, even though stocks fell slightly.

Lack of demand from Europe, where stocks are more than ample, have closed the transatlantic arb and shipping restrictions on the Colonial Pipeline have kept values low.

Analysts estimate about 76 million barrels of clean oil products are held in tankers floating at sea by the end of October. The bulk of them was gas oil floating off Europe.

U.S. refinery runs have hovered in the low 80 percent range for several months. Despite refiner discipline, U.S. inventories of distillates have risen to 26 year highs.

U.S. inventories of distillates dropped 400,000 barrels to 167.4 million barrels last week while national heating oil stocks were off 1.1 million barrels to 50.6 million, according to the latest government data. [EIA/S]

NYH cash heating oil shrugged off the fall, with offers about a penny lower than Tuesday on more-than-ample supplies in the region, traders said.

NYMEX crude futures edged up on Wednesday on the weaker dollar and a slump in crude oil inventories. [O/N]