Group 3 ULSD Basis Rallies 7.5cts Amid Diesel Squeeze

SECAUCUS, NJ (DTN) – Group 3 ultra-low sulfur diesel (ULSD) spot basis surged Tuesday (9/1) to lead Midwest physical gains as severe global supply deficits continue to propel distillate prices sharply higher.

Group 3 ULSD was talked at a discount of 5.5cts gallon to the October NYMEX ULSD contract, narrowing by 7.5cts on the day.

The strength in the Plains comes against the backdrop of record-low U.S. distillate inventories and ongoing midstream bottlenecks along the Explorer Pipeline network.

Chicago ULSD basis also strengthened, narrowing by 5.0cts to stand at an 11.0cts gallon discount to the October screen.

Buckeye Complex ULSD basis rose 1.5cts to a 11.0cts gallon discount, while Wolverine ULSD gained 1.75cts to match at 11.0cts under the benchmark.

In jet fuel markets, Group 3 jet basis widened by 5.0cts to a discount of 60.0cts gallon to October NYMEX ULSD. Chicago jet fuel basis softened by 4.0cts on the day, widening to a 69.0cts gallon discount.

Underlying futures provided the upward momentum, with October NYMEX ULSD surging $0.2667 to settle at $4.6773 gallon. The rally reflects historic strength in global distillate crack spreads, as record U.S. export demand and Middle East supply disruptions drag domestic inventories to all-time seasonal lows.