Midwest ULSD Basis Extends Strength on Pipeline Jam


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- Midwest ultra-low sulfur diesel (ULSD) basis values 
extended their strength Tuesday (5/18) as traders continued to adjust to 
intensifying refinery constraints across the region.

   ULSD basis at the Buckeye Storage Complex and the Wolverine Pipeline rose by 
35cts gallon to reach a premium of 75cts against the front-month ULSD contract 
on NYMEX, June. The ULSD basis for Chicago climbed 25cts to trade at 65cts 
gallon over the futures benchmark.

   Midwest ULSD premiums have risen sharply this week as traders respond to a 
multi-layered refining crunch that has gripped the PADD 2 region. A United 
Steelworkers lockout at BP's 440,000 bpd Whiting refinery has limited the 
facility's production flexibility. Turnarounds at Phillips 66's 356,000 bpd 
Wood River refinery and Marathon Petroleum's 253,000 bpd Robinson facility have 
also curtailed processing capacity.

   The tightening Midwest cash market for ULSD comes amid federal data showing 
PADD 2 distillate inventories dropping by 700,000 bbl to a lean 24.2 million 
bbl during the week ended May 8.

   In the opposite direction, Group 3 ULSD basis weakened this week, sliding 
13cts on the day to a discount of 20cts gallon against June NYMEX ULSD. The 
narrower spread is driven by a relatively steady supply-demand balance, 
according to traders.




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