MARKETWIRE ALERTS

MARKETWIRE ALERTS 

MarketWire Afternoon News for May 29^th  

Updated at 5:00 PM ET 

HEADLINES:

— Midwest ULSD Basis Tumbles on Talk of End to Iran War

— LA ULSD Basis Climbs 6cts on Refinery Constraints

— Los Angeles Jet Basis Falls 7cts on Trades

— AAR: Petroleum Carloads Up 2.1% for Week Ended May 23

— Baker Hughes: Weekly North America Rig Count Up by 28

— Analysis: How Iran War Turned Midwest Into Fuel Bottleneck

— Analysis: EIA Sees Distillate Stocks Plunge to 23-Yr Low

— Flint Hills Corpus Christi Reports Third Flare in Week

— Analysis: Fuel Shortage Risks Grow as Inventories Dwindle

NEWS:

Midwest ULSD Basis Tumbles on Talk of End to Iran War

Midwest ultra-low sulfur diesel basis values tumbled Friday (5/29) as NYMEX ULSD futures declined amid mounting diplomatic efforts to end the Iran war that has severely disrupted global oil flows.

ULSD basis at the Buckeye Storage Complex and the Wolverine Pipeline fell by 24cts gallon to a discount of 14cts against June ULSD on NYMEX. On Thursday, diesel at both Buckeye and Wolverine was showing a premium of 10cts gallon to the NYMEX benchmark.

In Chicago, the ULSD basis was at discount of 17cts, weakening a further 4cts from Thursday’s 13cts.

In contrast to the moves in ULSD, the basis for jet fuel was relatively stronger on Friday, compensating for their accelerated decline in recent sessions. The differential for jet fuel in Group 3 strengthened by 14cts to a discount of 55cts, converging with the basis for Chicago jet fuel, which was unchanged.

ULSD premiums across the Midwest evaporated as intensifying efforts to end the Iran war triggered a risk-off mood across both the futures and physical energy markets, with traders reevaluating near term inventories.

Distillate fuel oil inventories in the PADD 2 region slid by 200,000 bbl on the week to 23.6 million bbl during the week ended May 22, data from the U.S. Energy Information Administration showed Thursday. Midwest jet fuel balances were flat on the week at 6.8 million bbl.

A delayed flood of emergency supply from Gulf Coast pipelines also hit major Midwest distribution hubs this week as local refiners restored normalized production rates. The sudden convergence flipped the PADD 2 region from acute supply deficit to a prompt surplus that provided relief to retail racks, traders said.

LA ULSD Basis Climbs 6cts on Refinery Constraints

Prompt Los Angeles ultra low sulfur diesel (ULSD) basis strengthened Friday (5/29), climbing by 6cts as refinery capacity losses continued to support the West Coast distillate market.
Los Angeles ULSD traded three times during the session, first at a 42cts premium, then at a 43cts premium, and finally at a 44cts premium to July NYMEX ULSD futures. The final trade placed the basis 6cts above Thursday’s (5/28) last done trade.
Distillate fuel oil inventories in the West Coast region were steady at 10 million bbl during the week ended May 22 and stood 200,000 bbl higher than the same week last year, according to U.S. Energy Information Administration data.
PADD 5 distillate imports climbed by 22,000 bpd to 40,000 bpd during the profiled week and were 27,000 bpd higher than the same week in 2025, indicating additional barrels continued arriving into the region.
The shutdown of Phillips 66’s 139,000 bpd Los Angeles refinery and the ongoing closure process at Valero’s 145,000 bpd Benicia refinery have removed significant production capacity from the region, tightening the supply outlook and supporting diesel premiums.

Los Angeles Jet Basis Falls 7cts on Trades
Prompt Los Angeles jet fuel basis weakened Friday (5/29), falling by 7cts on lower bids, despite declining U.S. West Coast jet fuel inventories and imports.
Los Angeles jet fuel traded twice during the session, first at a 7cts premium and later at an 8cts premium to July NYMEX ULSD futures. The final trade placed the basis at an 8cts premium, 7cts down from Thursday’s (5/28) last assessed level.
The decline follows several weeks of volatility in the Los Angeles jet fuel market. Earlier this month, the basis climbed by 15cts on May 5 to a 60cts premium after rebounding from a sharp correction that followed the historic $1.10 gallon premium reached in late April, the highest level ever recorded for the market.
According to U.S. Energy Information Administration data for the week ended May 22, jet fuel inventories on the West Coast fell by 200,000 bbl to 10.8 million bbl and were 100,000 bbl lower than the same week last year.
Jet fuel imports into the region dropped sharply by 64,000 bpd to 25,000 bpd during the profiled week and were 156,000 bpd lower than the same week last year, leaving fewer barrels available to replenish regional supply.
Traders said the market pulled back Friday after the sharp gains seen earlier this spring, with weaker spot demand weighing on values. Still, supply concerns remain in focus as the West Coast prepares for peak summer travel demand.

The shutdown of Phillips 66’s 139,000 bpd Los Angeles refinery and the ongoing closure process at Valero’s 145,000 bpd Benicia refinery have reduced regional refining capacity, limiting the market’s ability to quickly replace lost production and helping support jet fuel values despite Friday’s decline.

AAR: Petroleum Carloads Up 2.1% for Week Ended May 23

The Association of American Railroads (AAR) reports that petroleum and petroleum product carloads totaled 10,778 during the week ended May 23, up 2.1% from the same week a year ago.

Year-to-date, petroleum and petroleum products carloads totaled 218,519, up 8.4% from the corresponding period of the prior year, an AAR report published on Wednesday (5/27) showed.

Weekly traffic for the profiled week totaled 523,574, up 7.2% from the same week a year ago. Total carloads for the week ended May 23 reached 230,831, up 2.2% from the same week of last year.

Weekly intermodal volume was 292,743 containers and trailers, up 11.5% from the corresponding week of the prior year.

Year-to-date, U.S. railroads reported carloads at 4,528,563, up 3.3% on the year.

Cumulative intermodal units were 5,555,553, up 1.4% from a year ago. Total rail traffic for the first 20 weeks of the year was 10,084,116 carloads and intermodal units, up 2.3% on the year.

Baker Hughes: Weekly North America Rig Count Up by 28

North American energy drilling activity increased by 28 rigs this week, according to Baker Hughes’ weekly rigs report released Friday (5/29). The regional rig count for the week ended May 29 stood at 724, compared to 696 in the week prior.

Rigs for Canada and the U.S. combined were also higher than the 675 actively deployed in the same week last year.

This week’s rig changes were driven by gains in both Canada and the United States, which saw increases of 24 and four rigs, respectively. Canada’s count climbed to 162, while the U.S. rig count reached 562, remaining just below the year-ago level of 563.

In the United States, oil rigs alone increased by four to 429. Conversely, the gas rig count held steady at 125, and miscellaneous rigs remained unchanged at eight.

By trajectory, U.S. horizontal rigs stood at 480 and directional rigs at 64, after subtracting six rigs and adding 10, respectively. Vertical rigs were flat at 13.

Analysis: How Iran War Turned Midwest Into Fuel Bottleneck

Long the bastion of stability for U.S. fuel supply-demand balances, the Midwest is finally feeling the squeeze of the broader domestic maintenance season, compounded by disruptions stemming from the Iran war.

Two months ago, the PADD 2 region still stood as the steady anchor of domestic downstream operations. Cheap domestic natural gas insulated regional processors while the region’s low dependence on crude imports via tanker protected margins from the escalating Middle East conflict.

With the war, the geographic isolation that initially shielded the region transformed into a distinct logistical bottleneck. Localized maintenance cycles and unexpected labor disputes severely restricted product availability across key pipeline distribution hubs.

Midwest refining fundamentals shifted rapidly as a six-week slide in gasoline inventories drove regional supplies to a critical seven-month low. Motor gasoline stocks in PADD 2 plummeted by 1.3 million bbl to 43 million bbl during the week ended May 22, the Energy Information Administration reported.

Extreme Rack Volatility

The basis for Chicago ultra-low sulfur diesel against the NYMEX ULSD benchmark jumped from a premium of 78cts a gallon at end-March to $1.10 by end-April. It reached a record high of $1.20 by May 11. By end-May, the basis had turned to a discount of 15cts, adjusting to a drop NYMEX ULSD on efforts to end the war.

Concurrently, Midwest CBOB basis went from a discount of 41cts against the NYMEX gasoline benchmark to a premium of 32cts by end-April. At May-end, the basis was back to a discount of 22cts as NYMEX gasoline tumbled as well.

Such volatility was remarkable by the Midwest’s standards. For decades, analysts needing a region that could tune out the drama of global shipping lanes, the West Coast’s isolation, or the East Coast’s heavy dependence on imports could count on the bastion of supply stability in the U.S. heartland stretching from the Ohio Valley to the Great Plains.

That reputation for stability was earned through a specific set of structural advantages, afforded by its location at the receiving end of a massive, direct pipeline network coming out of the Western Canadian Sedimentary Basin. While the East and West Coasts had to watch global tanker freight rates and geopolitical blockades in the Middle East, the Midwest relied heavily on stable, landlocked pipeline flows of heavy Canadian crude, typically in the form of Western Canadian Select.

In peacetime, this Canadian supply is trapped in the center of the continent, giving PADD 2 refiners first right to it. But with Brent soaring past $100 bbl due to the Strait of Hormuz blockade, global markets have turned desperate for non-Middle Eastern alternatives. West Coast or Gulf Coast pipelines began pulling Canadian crude away from the interior to satisfy international shortages.

Gulf Coast refiners fetch large war-driven premiums by exporting barrels waterborne to Europe, effectively eroding the Midwest’s historic raw material cost cushion and emergency backup.

Prior to the war, the Midwest was largely a self-sustaining ecosystem. It produced what it consumed, moving product efficiently through an extensive, internal pipeline and terminal network, led by the Wolverine or Buckeye systems, rather than relying on ocean-going vessels.

The region is home to some of the most complex, highly sophisticated refineries in the world, such as BP’s Whiting refinery in Indiana or Marathon Petroleum’s Robinson refinery in Illinois. These refineries were explicitly redesigned over the last few decades to process that cheap, heavy Canadian oil and turn it into high-yield diesel and gasoline.

Because of the U.S. shale boom, the Midwest also sat on or right next to an abundance of incredibly cheap domestic natural gas. When global natural gas prices skyrocketed, especially during European or Middle Eastern crises, Midwest refiners kept their operating costs rock-bottom compared to international competitors.

Lean System Crumbles

Conversely, a system so highly optimized and self-contained also runs lean. When two massive regional pillars stumble at the same time, such as Marathon’s Robinson refinery undergoing an extended 60-day turnaround while BP’s Whiting faced a prolonged labor lockout, there is no local safety cushion.

Along with its reputation for stability, the Midwest is also notorious for highly fragmented, localized fuel regulations, such as Chicago’s specific summer-grade RVP requirements and different state ethanol mandates. If a local refinery goes down, one cannot just easily truck in fuel from neighboring regions; the fuel often is not legally compliant.

This means that just as global chaos cannot easily get in to disrupt the Midwest, emergency supply cannot easily get in either. When local inventories plummet to a seven-month low, the region cannot just pull in waterborne imports like the East Coast can. It is hostage to rigid pipeline capacities moving north from the Gulf Coast.

Analysis: EIA Sees Distillate Stocks Plunge to 23-Yr Low

U.S. distillate fuel oil stockpiles have slumped to the lowest in 23 years, Energy Information Administration data showed Thursday (5/28). Record-high diesel exports amid the ongoing Middle East supply disruption have drawn down distillate fuel oil inventories to 100.8 million bbl in the week ending May 22.

The loss of millions of barrels per day of diesel flows from the Persian Gulf, and a global refining slump resulting from the sudden absence of more than 10 million bpd of crude oil supply had buyers worldwide increasingly turn to the U.S. in a scramble to source alternatives. Distillate fuel oil exports soared from 1.05 million bpd in mid-March to nearly 1.6 million bpd throughout April, and peaked at an unprecedented 1.86 million bpd in the week ending May 1. Over the past four weeks, they averaged just shy of 1.64 million bpd, up 22.8% year-on-year and nearly 34% higher than in March.

Inventories have consequently receded more than twice as fast as typical for the season. Since exports picked up the pace some nine weeks ago, nationwide distillate fuel oil stockpiles have dwindled by 19.14 million bbl, or 16%. In April alone, they drew at a pace of 507,000 bpd, compared to the five-year average rate of 206,000 bpd.

U.S. diesel wasn’t the only fuel with high international demand. Total refined product exports clocked in at 8.08 million bpd, last week, and over the last four weeks averaged 7.68 million bpd, nearly 1 million bpd more than in the comparable time span in 2025. The strong pull onto the export market drove combined commercial inventories of gasoline, diesel, fuel oil and other oils 5% below year-ago levels. Total petroleum stocks, which include record-high propane inventories up nearly 50% year-on-year, were down 2.4% from last year.

Domestic diesel and fuel oil demand is typically lowest in the summer, providing some respite to fast depleting inventories. Diesel stocks can cover just over 28 days of current demand, similar to the situation at this time last year. Inventories typically rise in June as a byproduct of low demand and refiners running hard to meet domestic gasoline demand. Were the Middle East supply disruption to persist over the summer, the seasonal rebuilding could take place at a much slower pace, leaving inventories dangerously low heading into the winter.

Flint Hills Corpus Christi Reports Third Flare in Week

Flint Hills Resources reported Thursday (5/29) flaring at the West Plant of its 269,500 bpd Corpus Christi West Refinery in Corpus Christi, a filing with the Texas Commission on Environmental Quality said. The event marks the third reported flare event at the refinery in the past week.

The event began at 9:47 a.m. CT Wednesday (5/28) and ended at 10:28 p.m. CT, the filing said.

According to the filing, flaring occurred from the refinery’s First Stage Flare. Estimated emissions included approximately 978 pounds of sulfur dioxide, 122 pounds of flare gas, and 69 pounds of benzene.

The company said personnel initiated measures to assess and minimize emissions following the incident. Flint Hills also said handheld fenceline monitoring detected no readings of VOCs, hydrogen sulfide, carbon monoxide, sulfur dioxide or lower explosive limits.

The refinery primarily produces jet fuel, diesel, and gasoline.

DTN reached out to Flint Hills Resources for additional details but did not get an immediate response.

Analysis: Fuel Shortage Risks Grow as Inventories Dwindle

U.S. refined fuels inventories are set for further declines just as demand reaches its seasonal peak this summer, even if the Middle East supply squeeze were to get resolved soon. High international demand will continue to pull barrels from U.S. inventories onto the export market and will compete with domestic demand, carrying the potential for further price hikes.

The sharp rise in transportation fuel costs since the start of the U.S.-Israeli war on Iran – on highway gasoline prices are up 50%, according to Energy Information Administration data – was driven by more than just soaring crude oil prices. The Hormuz supply disruption, aside from affecting millions of bpd of refined product flows, forced refiners to slash runs amid the lack of feedstock deliveries. In China, a main fuel exporter, crude oil inputs in refineries fell to lows last seen amid crashing fuel demand during the prolonged COVID lockdown.

Refined fuels production in the U.S., in contrast, did not encounter logistical constraints, given that Middle Eastern crude oil represents less than 4% of domestic refiners’ diets. Inventories, however, weren’t shielded by the supply crunch as oil and fuel exports soared to unprecedented levels. Refined product exports have been running around 1 million bpd above both the pre-war and year-ago pace, accelerating the inventory depletion rate beyond typical seasonal patterns.

Nationwide stockpiles of distillate fuel oil have dwindled almost twice as fast as usual this spring, dropping to 102.91 million bbl, 8.5% below the five-year average and 1.2% below last year’s near-record low levels. Motor gasoline inventories have plummeted to 214.2 million bbl, trailing both the five-year average and 2025 levels by some 5%.

The sharp drop in gasoline inventories was also a consequence of refiners prioritizing the production of fuels most affected by the supply crisis, particularly of middle distillates like diesel and jet fuel. Middle distillate cracks are currently around a third above pre-war levels and more than twice as high as at the same time last year.

Despite a year-on-year uptick in refinery utilization, gasoline production has over the past four weeks slightly lagged year-ago levels, while production of jet fuel and diesel was up 8.4% and 6%, respectively. Exports of these products have soared to record levels, up a combined 500,000 bpd from May 2025.

Price pressure from shrinking inventories and a global fuel supply crunch is likely to persist, and may even intensify amid seasonally rising summer demand. The EIA forecasts an average retail price of $4.31 for a gallon of regular gasoline and $5.36 for a gallon of diesel in the second quarter, up 37.7% and 32% from Q1, respectively.

The agency’s latest outlook published in early May saw prices ease in the third quarter. The underlying model, however, was based on the increasingly unlikely looking assumption that flows from the Persian Gulf will gradually return in June. Even under this most optimistic scenario, the EIA sees gasoline inventories plummet to 212.5 million bbl by the end of September, a forecast likely to be revised lower given the faster-than-expected depletion rate of the past few weeks.