Chicago Spot ULSD Basis Holds as Futures Premium


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

    

    

   DAVENPORT, FL (DTN) -- Chicago pipeline spot diesel basis remained at a 
premium to NYMEX ULSD futures for a second week amid tightening inventories and 
regional refinery issue.

   Chicago prompt ULSD was valued at a 3.75cts premium to August NYMEX ULSD 
futures, holding in premium territory since early July. This marks the first 
sustained stretch at a premium since a brief period in mid-November last year. 
Market participants attributed the strength to tightening supply and seasonal 
agricultural diesel demand.

   Chicago spot ULSD basis is trading sharply above Group 3 spot ULSD basis, 
with the spread currently at 8.50cts. Historically, Chicago ULSD spot basis 
tends to price at parity or a discount to Group 3, making the current basis 
blowout notable.

   While seasonal Midwest diesel basis spikes do occur, participants note moves 
of this magnitude are relatively rare and typically driven by a mix of refinery 
maintenance, weather disruptions, or strong diesel use from planting or harvest 
activity.

   In refinery news, flaring was reported Monday (7/7) at BP's 440,000 bpd 
refinery in Whiting, Indiana, the largest in the Midwest, due to "operational 
conditions," the company posted on social media. The post indicated it was not 
an emergency. When asked about clarification on operational impact, a company 
spokesperson cited company policy of not commenting on operational issues.

   Adding to the bullish tone, Midwest PADD 2 ULSD inventories fell 1.6% to 
23.9 million bbl for the week ended July 4, leaving stocks more than 23% below 
last year's level of 31.0 million bbl, according to the latest data from the 
U.S. Energy Information Administration.

   Market participants await the USDA's monthly Crop Production report, due out 
Friday, which could provide further confirmation of underlying agricultural 
diesel demand trends.




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