Midwest ULSD Basis Spikes on Diesel Squeeze Fear


   
Barani Krishnan
DTN Refined Fuels Market Reporter

   SECAUCUS, NJ (DTN) -- The basis for Midwest ultra-low sulfur diesel (ULSD) 
surged Thursday (5/7), with buyers paying huge premiums over what market 
participants described as fears of a near-term squeeze in diesel supply after 
federal data showed a weekly stockpile drop last week.

   ULSD at the Buckeye Storage Complex in northern Indiana, as well as the 
Wolverine Pipeline -- which stretches from the Chicago area to Michigan -- both 
traded at a premium of 80cts gallon to NYMEX ULSD for June, Midwest fuel 
traders with knowledge of the transactions told DTN.

   It was the highest basis for both since May 1, when their premiums were at 
83cts gallon, DTN data show.

   Of the two, Buckeye had the steepest price increase, rising 64.5cts on the 
day while Wolverine rose 55.5cts.

   Chicago USLD had a 15cts move up on the day, to a premium of 25cts gallon.

   The surge in premiums came after the U.S. Energy Information Administration 
(EIA) reported on Wednesday (5/6) that distillate fuel oil inventories in the 
Midwest dropped by 1 million bbl to 24.9 million bbl during the week ended May 
1. Despite the weekly decline, PADD 2 distillate balances remained slightly 
above the 24.7 million bbl reported in the same week of the previous year, the 
EIA data showed.

   "It seems there was some pressure for buyers to get distillates delivery 
now," said one Midwest trader.




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