Midwest ULSD Basis Rises as Pipeline Supplies Tighten

SECAUCUS, NJ (DTN) – Midwest ultra-low sulfur diesel (ULSD) basis values strengthened Monday (5/18) with the regional premium climbing to 40cts gallon over June NYMEX ULSD as traders adjusted to intensifying refinery constraints across the region.

ULSD basis at Chicago, Buckeye Storage Complex and the Wolverine Pipeline rose by 23.5cts gallon from Friday’s (5/15) premium of 16.5cts.

By contrast, Group 3 ULSD basis weakened from the prior session’s Merc level to a 7cts discount to the NYMEX benchmark. Traders attributed the divergence on the basis to Group 3 being in a relatively comfortable supply situation compared with the tighter markets along the other three pipeline systems. 

The tightening Midwest cash market for ULSD follows federal data showing PADD 2 distillate inventories dropping by 700,000 bbl to a lean 24.2 million bbl during the week ended May 8.

Regional processing flexibility also remains heavily restricted by an ongoing labor lockout at BP’s 440,000 bpd Whiting refinery, alongside prolonged maintenance turnarounds at Phillips 66’s 365,000 bpd Wood River refinery and Marathon Petroleum’s 235,000 Robinson facility.