Midwest ULSD Basis Dip as Markets Shift to Cycle 3

Midwest ULSD Eases as Markets Shift to Cycle Three Trade

DAVENPORT, FL (DTN) — Midwest ULSD basis fell on Monday (11/17) as values in Chicago, Wolverine and Buckeye declined by 21.5cts from Friday and settled at a 5.5cts discount to December ULSD futures on the New York Mercantile Exchange as the market rolled into Cycle 3.

This price reversal follows an unexpected increase recorded on Friday (11/14) when ULSD traded sharply higher at a 16cts premium to December ULSD, reaching a two-year high ahead of the Cycle Two cutoff amid a strong backwardation structure.

However, once the market rolled into Cycle 3 scheduling, “some of that premium was expected to come off,” one trader familiar with the market said.

The sharp pullback from Friday to Monday marks the biggest single-day move in Chicago ULSD basis in more than two years, with Wolverine and Buckeye showing the same day-on-day decline, according to DTN Energy data.

Indications for the remainder of the week show steady values as market participants watch pipeline scheduling and late-month demand for further direction.