Chicago ULSD Basis Up as Buckeye, Wolverine Premiums Surge

SECAUCUS, NJ (DTN) – The basis for Chicago ultra-low sulfur diesel (ULSD) rose by 35cts early Friday (5/8) to a 60cts gallon premium over front-month NYMEX ULSD futures, based on price indications. This narrowed the gap with a larger basis for the same product on the Buckeye Storage Complex and Wolverine pipeline.

With its latest move up, Chicago ULSD’s premium to NYMEX ULSD for June was at its highest level since the May 1 when it was assessed at 78.50cts gallon.

On Buckeye, located in northern Indiana, and Wolverine – whose stretches from the Chicago area to Michigan – the premium to NYMEX June ULSD was at 80cts gallon, Midwest fuel traders with knowledge of the transactions told DTN.

Traders noted that buyers were paying huge premiums this week for Midwest ULSD on fears of a near-term squeeze in diesel supply after U.S. Energy Information Administration (EIA) data showed a weekly drop in stockpiles.

The 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 added.