US Cash Products-Distillates strong on contango

NEW YORK, July 10 (Reuters) - Distillates remain strong despite weak demand as the market contango continues to support prices by putting barrels into storage, traders said on Friday.

The steep contango structure of the futures heating oil benchmark has pushed distillate stockpiles to a 25-year high as barrels continue to go into storage.

Support is also seen from refinery outages, most notably the outage of Valero's Ardmore, Oklahoma refinery hydrotreater, crude unit and gasoline-making fluid catalytic cracking unit after a fire last weekend.

Valero also has begun the shutdown for economic reasons of the 275,000-barrel-per-day Aruba refinery for two to three months. [ID:nN09456571]

U.S. crude oil futures hovered around the $60 per barrel level as demand stays weak through the end of the year, according to global watchdog International Energy Agency. [O/N]

For a complete list of refinery outages, click [REF/US]

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Prompt cycle 40 61-grade ultra low sulfur diesel held at 2.25 cents over the August heating oil screen.

Buying interest in contango storage barrels continue to dominate the market, with renewed mid-continent interest from Valero's shut hydrotreater at Ardmore, Oklahoma, refinery after a weekend fire.

Jet continued to rise, talking at 7.50 cents over the August screen although trade was hard-pressed to find a fundamental reason for the high price.

Cycle 40 conventional M2 gasoline fell almost a penny to trade at 8.59 cents under the August RBOB contract.

The regrade between M1 widened to 5.75 cents over on dearth of barrels, as refiners are seen holding back making the lower RVP blend in an attempt to push prices higher.

"Ebb and flow. The regrade will go to 5.75 cents over. People will start making it and then it will go back to 2.00 cents over," said one trader

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Heating oil rose as much as 3 cents per gallon, done at 3.00 cents under the August NYMEX heating oil futures for barrels by July 15th, up from 6.25 cents under the print midday Thursday. Earlier Friday it was bid 3.50 cents under for Colonial Pipeline barrels, against no offers.

ULSD diesel was offered two cents firmer at 6.00 cents over the August print on Friday and low sulfur was offered even to the Merc, up from 0.75 cent under.

Jet fuel was bid a penny and a half higher at 8 cents over, against no offers by midday and kerosene offers were up by 3 cents at 11.50 cents over the print.

M2 gasoline was set at 4.25 to 4.50 cents under August futures for barrels by July 20th, down a little from 4.00 cents under Thursday. Anys were at 5.00 cents under, at a par with midday Thursday but down half a penny from later that day.

F2 reformulated by July 20th was flat to a tad firmer at 0.75 cent over with any month at 0.50 cent over, traders said.

H2 was pegged last at about 17 cents over, down sharply.

"It's gone dead, it's Friday afternoon in the summer," a trader said.

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Dead prompt X-grade ultra-low sulfur diesel slipped half a cent to talk either side of 7 cents over the August heating oil screen, traders said.

N-grade gasoline for prompt delivery was pegged at 3 cents under the screen, down slightly.

In Chicago, cycle 2 ultra low sulfur diesel was pegged at 2 to 3 cents over the screen while

Unleaded gasoline for cycle 2 was seen at 2 cents under the screen with cycle 3 pegged at a penny under. (Reporting by Janet McGurty and Haitham Haddadin)