US Products Outlook-Moribund diesel shows signs of life

NEW YORK Nov 23 (Reuters) - Ultra-low sulfur diesel along the Gulf Coast's refinery row is expected to firm slightly as buyers seek cover ahead of the U.S. Thanksgiving holiday weekend, traders said on Monday.

High inventories caused by pervasive weak economic demand are being trimmed as refiners cut back on runs and close refineries.

"Those refinery run cuts are soaking up some of the excess," said one Gulf Coast trader.

The Gulf Coast diesel arb to Northwest Europe is confined to system cargoes, traders said, as NWE stocks stay high and weather on the continent stays warm.

"The arb is marginal," said another trader, adding that run cuts have started to do their job in the United States.

In the Midwest, traders said that vestiges of agricultural demand remain, but that it will soon be over and any draw on diesel will be over, traders there said.

In PADD I, closure of two East Coast refineries is seen providing much needed capacity cuts, traders said.

Valero announced on Friday it was closing its 210,000 barrel per day Delaware City, Delaware refinery due to poor refinery economics rather than just shutting it for intensive maintenance as originally planned . [ID:nN20224848]

On Monday, the company said it expected the process to be completed in a few days [ID:nN2339433] with little short-term impact seen from the closure.

"Long term (impact) possible but not going to affect short term. Since there is plenty of product out there, (it's) going to be a while before it is missed," said a New York Harbor trader.

However, European gasoline got a bit of a kick from the closure, traders there said, keeping the arb for gasoline to the U.S. closed.

"Even though demand is low, it still has some baseload demand," said one about the Delaware City refinery.

Demand for heating oil, the favorite home heating fuel in the U.S. Northeast, is expected to be about 21 percent below normal this coming week, according to the U.S. National Weather Service. [ID:nN23360484]

Temperatures in the Northeastern states are seen averaging near to above normal during the next five days, according to private forecaster DTN Meteorlogix. [ID:nDTN650] ((Reporting by Janet McGurty in Toronto, Haitham Haddadin in New York, Kristen Hays in Houston, and Ikuko Kurahone in London) (janet.mcgurty@thomsonreuters.com; Reuters Messaging: janet.mcgurty.reuters.com@reuters.net; 646 226 3027))