Chicago ULSD Basis again Weakens as Backwardation Narrows
6/29 2:49 PM
Chicago ULSD Basis again Weakens as Backwardation Narrows CRANBURY, N.J. (DTN) -- Basis for ultra-low sulfur diesel fuel in Chicago spot markets weakened 300 points Wednesday while down more than 1,000 points over the past two sessions, as backwardation in the physical market narrows amid easing regional supply tightness. Ahead of the move to cycle one July pipeline timing on Monday, there was strong backwardation during cycle three June trading, with intermonth July values trading as much as 800 points above late June pipeline deliveries. The spread came in sharply to a 200-point July premium this week as regional demand and trading activity has been weak since mid-June, with two major regional refiners turning to sellers in the spot market. Energy Information Administration data released midmorning show PADD 2 refiners increasing their production of distillate fuel, which averaged 30,000 bpd or 2.6% more during the most recent four-week period through June 24 at 1.185 million bpd than during the first five months of 2022. Distillate inventory in PADD 2 was drawn down 500,000 bbl to 25.9 million bbl last week, 6.2 million bbl less than the three-year average, although stocks increased 1 million bbl since late May. ULSD for movement from northern Illinois to Wisconsin on the West Shore, Badger pipeline network was talked 200 points over August futures on the New York Mercantile Exchange, and at a 250-point premium for eastbound movement from northern Indiana to Michigan on the Wolverine Pipeline. The premium barrel in the Chicago market was in northern Indiana at the Buckeye Storage Complex where ULSD was pegged at a 300-point futures premium. Brian L. Milne, 1.402.255.8020,, (c) Copyright 2022 DTN, LLC. All rights reserved.
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