MARKETWIRE ALERTS
Barani Krishnan
DTN Refined Fuels Market Reporter
MARKETWIRE ALERTS
MarketWire Afternoon News Sept 1:
Updated at 5:00 PM ET
HEADLINES:
- Group 3 ULSD Basis Rallies 7.5cts Amid Diesel Squeeze
- Group 3 CBOB Basis Surges 47.75cts in Broad Gasoline Rally
- API: Crude Stocks Draw by 2.6M Bbl, Gasoline Builds
- DTN U.S. Gasoline Markets Shift to Higher RVP Specs
- Shell to Double U.S. Retail Network With Tri-Star Deal
- EIA: U.S. LNG Exports Surge 23% in First Half 2026
- U.S. Job Openings Little Changed at 7.3 Million in July
- Cenovus Schedules Planned Turnaround at Lima Refinery
- ISM: U.S. Manufacturing Grows in August, PMI at 54.6
- Marathon Galveston Bay Reports 24-Hour Emissions Event
- Analysis: Diesel Cracks Soar, Stocks Plummet in August
- EIA: U.S. Retail Diesel Falls 5.3cts From 4-Year High
- EIA: U.S. Retail Gasoline Falls 1.4cts to $4.071
NEWS
Group 3 ULSD Basis Rallies 7.5cts Amid Diesel Squeeze
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.
Group 3 CBOB Basis Surges 47.75cts in Broad Gasoline Rally
Group 3 CBOB differentials surged Tuesday (9/1) to push cash values for
Midwest gasoline higher alongside gains in NYMEX RBOB, joining a broadly higher
finish across energy futures.
The discount for Group 3 CBOB narrowed by 47.75cts to stand at 2.25cts
against the October NYMEX RBOB benchmark. The outsize leap was primarily a
structural adjustment reflecting NYMEX RBOB's official transition to October as
the front-month contract from the prior September.
Across regional pipeline networks, basis adjustments were far more modest.
Chicago CBOB narrowed by 1.5cts to a discount of 11.5cts gallon against the
October benchmark.
In the Buckeye Complex and Wolverine markets, CBOB differentials narrowed by
1ct each on the day to stand at an 8cts gallon discount to October futures.
The gains in physical gasoline came as October RBOB settled up 5.81cts on
the day at $3.1351 gallon, climbing from its previous close of $3.0770 gallon.
Despite the daily gain, gasoline futures trailed the rally seen in
distillate markets as high regional refinery runs of 96.8% -- aimed at
capturing peak diesel margins -- contributed to a secondary surplus of gasoline
blendstock.
The front-month's transition to October futures also removed the summer
driving season premium, capping gains for the new prompt contract relative to
the rest of the barrel.
Group 3 CBOB Basis Surges 47.75cts in Broad Gasoline Rally
Group 3 CBOB differentials surged Tuesday (9/1) to push cash values for
Midwest gasoline higher alongside gains in NYMEX RBOB, joining a broadly higher
finish across energy futures.
The discount for Group 3 CBOB narrowed by 47.75cts to stand at 2.25cts
against the October NYMEX RBOB benchmark. The outsize leap was primarily a
structural adjustment reflecting NYMEX RBOB's official transition to October as
the front-month contract from the prior September.
Across regional pipeline networks, basis adjustments were far more modest.
Chicago CBOB narrowed by 1.5cts to a discount of 11.5cts gallon against the
October benchmark.
In the Buckeye Complex and Wolverine markets, CBOB differentials narrowed by
1ct each on the day to stand at an 8cts gallon discount to October futures.
The gains in physical gasoline came as October RBOB settled up 5.81cts on
the day at $3.1351 gallon, climbing from its previous close of $3.0770 gallon.
Despite the daily gain, gasoline futures trailed the rally seen in
distillate markets as high regional refinery runs of 96.8% -- aimed at
capturing peak diesel margins -- contributed to a secondary surplus of gasoline
blendstock.
The front-month's transition to October futures also removed the summer
driving season premium, capping gains for the new prompt contract relative to
the rest of the barrel.
API: Crude Stocks Draw by 2.6M Bbl, Gasoline Builds
U.S. commercial crude oil stocks decreased by 2.6 million bbl during the
week ended August 28, following the 4.2 million bbl build recorded the previous
week, the American Petroleum Institute (API) reported on Tuesday (9/1).
API reported a stockpile increase of 200,000 bbl at the Cushing, Oklahoma,
delivery point for NYMEX West Texas Intermediate futures, following the 1
million bbl build reported in the prior week.
Distillate fuel oil inventories fell by 300,000 bbl, adding to the 500,000
bbl draw reported the prior week.
Gasoline inventories went the other way, increasing by 300,000 bbl,
following the 3.2 million bbl draw recorded in the previous week
DTN U.S. Gasoline Markets Shift to Higher RVP Specs
DTN gasoline assessments will reflect higher Reid Vapor Pressure (RVP)
specifications starting Tuesday (9/1), as fall seasonal blending changes took
effect.
In the Chicago and Midwest markets, CBOB Regular, RBOB Regular, Premium
Gasoline and RBOB Premium transitioned to 11.5 RVP.
In Group 3, sub-octane and premium gasoline transitioned to 10.0 RVP,
replacing the previous lower-RVP summer specification.
On the U.S. Gulf Coast, CBOB Regular, Premium CBOB, conventional Regular and
conventional Premium gasoline transitioned to 11.5 RVP. RBOB and Premium RBOB
transitioned separately to 13.5 RVP.
The seasonal shifts reflect the move toward more volatile gasoline
specifications as temperatures cool heading into the fall and winter demand
season.
These RVP changes should be considered when comparing day-to-day cash
differentials, as part of an apparent price move may reflect a change in the
product specification being assessed rather than an actual move in the
underlying physical market.
Shell to Double U.S. Retail Network With Tri-Star Deal
Shell announced Tuesday (9/1) it will more than double its network of U.S.
convenience stores with the acquisition of Tri Star Energy.
The expansion was made possible by a 100% widening of the stake held in Tri
Star by Equilon Enterprises, which operates as Shell Oil Products U.S., a Shell
statement said.
Equilon previously owned 33% of Tri Star, a Nashville-based convenience
store operator and fuel distributor operating across the southeastern United
States.
"The acquisition makes Shell the full owner of an additional 320 fuel and
convenience retail sites in Tennessee and surrounding states, as well as supply
agreements with 552 more dealer-owned locations," the statement added.
EIA: U.S. LNG Exports Surge 23% in First Half 2026
U.S. liquefied natural gas exports surged 23% during the first half of 2026,
driven by expanded liquefaction capacity across the Gulf Coast, the U.S. Energy
Information Administration said Tuesday (9/1).
EIA projects gross LNG exports will average 17.3 billion cubic feet per day
(Bcf/d) across the second half of 2026 before expanding further to 18.7 Bcf/d
in early 2027.
Third-quarter export volumes are expected to average 16.5 Bcf/d, reflecting
brief operational constraints and facility maintenance, the agency added.
Despite temporary maintenance interruptions, Henry Hub spot prices are
forecast to average $2.87 per million British thermal units (MMBtu) in the
third quarter amid robust domestic natural gas production.
High underground storage inventories heading into autumn are expected to
keep benchmark Henry Hub prices capped below $3.00 MMBtu through the coming
months.
U.S. Job Openings Little Changed at 7.3 Million in July
Job openings in the U.S. labor market were little changed in July at 7.3
million, the Bureau of Labor Statistics reported Tuesday (9/1) in its monthly
Job Openings and Labor Turnover Summary, with the rate holding steady at 4.4%.
BLS said the number of job openings increased in durable goods manufacturing
by 76,000 in July. June job openings were revised down by 177,000 to 7.2
million.
Hires and total separations were both little changed at 5.1 million and
3.2%, respectively, with quits steady at 3.1 million and layoffs and discharges
holding at 1.7 million.
Layoffs and discharges decreased in finance and insurance by 22,000, while
hires decreased in professional and business services by188,000. Quits
decreased in other services by 46,000.
In July, the layoffs and discharges rate decreased for establishments with 1
to 9 employees, while the job openings, hires, quits, and total separations
rates showed little or no change.
Cenovus Schedules Planned Turnaround at Lima Refinery
Cenovus Energy has announced a planned turnaround at its 183,000 bpd Lima
refinery in northwest Ohio beginning this month and stretching through
mid-October that will involve processing units being taken offline temporarily
for scheduled maintenance.
"The work is intended to support the refinery's continued focus on safe,
reliable and compliant operations," a company statement shared with DTN on
Tuesday (9/1) said.
The statement added that there may be "intermittent flaring, noise or odors
as this work proceeds", adding that increased traffic may also be noticeable
around the refinery throughout the turnaround, particularly during shift
changes.
Located in Allen County, Ohio, the Lima refinery processes heavy and light
crude oil feedstocks to produce gasoline, ultra-low sulfur diesel, and jet
fuel, supplying key regional markets across the Midwest.
ISM: U.S. Manufacturing Grows in August, PMI at 54.6
A key U.S. purchasing managers index released on Tuesday (9/1) showed that
manufacturing activity in August expanded for the eighth consecutive month,
continuing a sustained period of growth in the sector.
The Manufacturing Purchasing Managers Index of the Institute for Supply
Management (ISM) stood at 54.6% in August, down 1 percentage point from the
July figure of 55.6%. Despite the modest pullback, the overall economy
continued in expansion for the 22nd consecutive month.
The reading extended a broad and sustained recovery. A Manufacturing PMI
above 47.5%, over a period of time, generally indicates an expansion of the
overall economy.
New orders expanded for the eighth consecutive month after four straight
readings in contraction, though the New Orders Index slipped 3 percentage
points from July, registering 53.7% versus 56.7% the prior month. The
Production Index came in at 58.3%, marginally below July's 58.5%, marking
expansion for the 10th consecutive month.
The Prices Index was at 71.1%, unchanged from July, remaining firmly in
expansion territory and signaling continued upward pressure on input costs. The
Backlog of Orders Index registered 51.8%, down 3.2 percentage points from
July's 55% reading, while the Employment Index fell 1.6 percentage points to
51.2%, still indicating expansion.
"In August, U.S. manufacturing activity remained in expansion territory,
though it has lost ground in a number of key measures, namely, the New Orders,
Backlog and Imports indexes. Of the five subindexes that make up the PMI, the
only one that grew faster than last month was Supplier Deliveries (up 0.4
percentage point), indicating a continuing slowdown of the supply chain," said
Susan Spence, chair of the ISM Manufacturing Business Survey Committee.
The Supplier Deliveries Index indicated slowing supplier performance for the
ninth consecutive month, rising 0.4 percentage point to 59.3%, a sign of
increasing demand straining supply chains. The Inventories Index registered
50.6%, while the Imports Index fell 3.2 percentage points to 52.5%. New Export
Orders edged up 0.2 percentage point to 53.2%.
Sentiment among respondents turned more cautious in August. 58% of comments
were negative and 42% positive -a ratio of 1-to-1.4. Among negative comments,
pricing volatility was cited in 57%, increasing lead times in 46%, the Iran war
in 30%, and tariffs in 29%.
On the supply side, 22% of the manufacturing sector's GDP contracted in
August, up from 20% in July, with 2% of manufacturing GDP falling into strong
contraction, defined as a composite PMI of 45 % or lower, compared to zero in
July.
Marathon Galveston Bay Reports 24-Hour Emissions Event
Marathon Petroleum's 631,000 bpd Galveston Bay refinery experienced a
24-hour emissions event after a damper malfunction tripped a selective
catalytic reduction (SCR) blower offline, a filing with the Texas Commission on
Environmental Quality showed.
The event began at 10:30 a.m. CT Monday (8/31) and ended at 10:30 a.m.
Tuesday (9/1) at the largest U.S. refinery, located in Texas City, Texas,
according to the filing.
The event involved multiple pre-heat and reheat furnaces and a regeneration
flue gas heater at the refinery's Ultraformer Unit No. 3 (UU3), a catalytic
reformer used to produce high-octane gasoline blending components. Estimated
nitrogen oxide (NOx) emissions totaled 400 pounds.
Operators ran the blower manually while repairs were made to the damper, the
filing added.
The Galveston Bay refinery primarily produces gasoline, diesel, and jet fuel.
DTN reached out to Marathon Petroleum for additional details but did not get
an immediate response.
Analysis: Diesel Cracks Soar, Stocks Plummet in August
U.S. diesel inventories shrank rapidly throughout August and last week
plummeted to their seasonally lowest on record as exports ran some 400,000 bpd
ahead of year-ago levels. Meanwhile, ultra-low sulfur diesel (ULSD) cracks
climbed to its highest level in history, reflecting the severe global
structural diesel supply deficit outweighing comparatively softer crude oil
fundamentals.
Scarce Diesel
Driven by multi-front global supply deficits, including
crude-shortage-induced low refining operations, shut-in flows, and war-related
refinery outages in the Middle East and in Russia, the ULSD crack -- the price
difference between a barrel of the most actively traded ULSD and WTI futures
contract traded on the New York Mercantile Exchange -- recently surpassed an
unprecedented $100 bbl, while the overall 3:2:1 crack spread climbed from$57
bbl at the beginning of the month to top $70 bbl. Middle distillate cracks
expanded by over 40% across recent four-week windows as refining capacity
struggled to match high export demand against the backdrop of already limited
inventories.
The structural divergence between crude and product markets landed on
consumers with sharp intensity in late August. The U.S. Energy Information
Administration's weekly gasoline and diesel fuel update revealed that
nationwide retail diesel prices had climbed through most of August, reaching
$5.652 gallon in the week ended August 24, the highest national average
recorded since July 2022, when Russia's invasion of Ukraine and subsequent
international sanctions on the country squeezed international diesel supply.
Diesel retail prices last week sat $1.865 per gallon above year-ago levels,
underpinned by inventory drawdowns that dragged distillate stocks to an
all-time seasonal low of 103.4 million bbl, nearly 15% below the five-year
seasonal average and down 10% year-on-year.
Combined U.S. road fuel inventories tumbled to an 18-year low 310.2 million
barrels last week. Persistent steep backwardation across ULSD and RBOB forward
curves continues to discourage storage activity, while strong international
demand pulls domestic barrels into export markets. Exports, particularly of jet
fuel and diesel, continued at unprecedentedly high levels in August. Distillate
fuel oil exports alone clocked in at more than 1.8 million bpd over the past
four weeks, up 400,000 bpd year-on-year. Total refined product exports averaged
8.15 million bpd during this time, some 1.18 million bpd, or 17%, higher than
in the same period last year.
Diesel inventories globally mirrored this development. European and Asian
middle distillate stocks continued to dwindle and remained historically
depressed amid the nearly six-month long Persian Gulf supply disruption.
European diesel supply is partially dependent on imports from the Middle East,
while Asian refiners rely on crude and other feedstock to produce fuels.
Minor Disruptions, Major Impacts
To capture historically high margins, U.S. refiners utilized 96.8% of
operable capacity over recent four-week windows, with Midwest plants running at
full steam and Gulf Coast facilities at near-maximum capacity. However,
operating above 95% utilization continuously since late May, an unusually long
time, substantially elevates the risk of refinery unit outages. In addition,
the lack of spare production capacity also means that any lost production will
be hard to replace.
The vulnerability of domestic supply networks was exposed in mid-August by
an accident destroying three natural gasoline storage tanks at Explorer
Pipeline's terminal facility in Oklahoma. The subsequent suspension of
operations at the critical junction connecting Gulf Coast refineries to major
distribution hubs in the Midwest had immediate ripple effects on regional cash
markets and prices at the pump. The day after the incident, prompt sub-octane
CBOB cash offers in Group 3 surged to 12.5cts over RBOB futures, and Chicago
offers climbed to a 4ct premium. Retail diesel and gasoline prices in the
Midwest jumped 25.4cts gallon and 12.2cts gallon, respectively. The disruption
against the backdrop of an already strained refining environment was compounded
by idling units at P66's Wood River refinery in Illinois.
E15 Waiver Extension
To mitigate pressure on domestic gasoline prices, the Environmental
Protection Agency (EPA) on August 20 extended the E15 waiver until September
15, ending the summer-blend requirements for gasoline two weeks early. The
order established a temporary nationwide RVP standard of 10-psi for E10 through
E15 blends. Shifting the winter-blend transition forward is meant to ease
gasoline supply by allowing blenders to incorporate high-volatility components
like normal butane back into the mix.
Looking Ahead
Higher diesel demand during harvest season is set to test already tight
middle distillate supply. In the Midwest, where inventories are currently 5.6%
below the seasonal five-year average, harvest demand is likely to keep Chicago
and Group 3 basis differentials highly volatile until Glenpool midstream
operations fully normalize.
Suppliers and buyers on the Gulf Coast, meanwhile, are bracing for peak
Hurricane season. While forecasters are prediction below-average tropical
activity, even minor weather-induced outages of mid- and downstream operations
carry the potential to trigger outsized price spikes against the backdrop of
depleted inventories and lack of spare refining capacity.
Refining margins are bound to stay elevated and may rise even further as
global structural fuel supply deficits outweigh comparatively softer crude oil
fundamentals. Even as refinery activity in Asia is starting to recover in light
of higher crude flows from the Middle East, the effect of this increase in fuel
supply on inventories and prices won't be felt immediately, and may be
partially countered by war-induced refinery outages in Russia.
A steeply backwardated time structure in refined fuels futures will
discourage inventory building heading into autumn, keeping domestic road fuel
stocks at multi-year lows as refiners prioritize high-margin export markets.
EIA: U.S. Retail Diesel Falls 5.3cts From 4-Year High
U.S. pump prices for diesel fell 5.3cts this week to $5.599 gallon during
the week ended August 31, retreating from the more than four-year high reached
the previous week, Energy Information Administration (EIA) data showed Tuesday
(9/1).
The national average remained $1.865 above levels seen during the previous
year after reaching $5.652 gallon in the prior week, the highest since the week
ended July 4, 2022.
The Gulf Coast (PADD 3) posted the largest weekly decline, falling 12.1cts
to $5.360 gallon, followed by the Lower Atlantic (PADD 1C), which dropped
7.4cts to $5.276 gallon.
The Midwest (PADD 2) fell 6.5cts to $5.571 gallon, while East Coast (PADD 1)
diesel prices declined 5cts to $5.448 gallon.
California recorded the largest weekly increase, rising 17.8cts to $7.218
gallon, while the West Coast (PADD 5) climbed 9cts to $6.497 gallon. The Rocky
Mountain region (PADD 4) rose 1.8cts to $5.555 gallon.
EIA: U.S. Retail Gasoline Falls 1.4cts to $4.071
U.S. pump prices for regular gasoline fell 1.4cts to $4.071 gallon during
the week ended August 31, Energy Information Administration data showed Tuesday
(9/1).
The national average remained 89.4cts above levels seen during the previous
year and held above the $4 gallon mark despite retreating from $4.085 gallon
the prior week.
New England (PADD 1A) posted the largest weekly increase, rising 7cts to
$4.096 gallon, while the West Coast (PADD 5) registered the second-largest
gain, climbing 5.9cts to $5.206 gallon.
On the opposite end, the Rocky Mountain region (PADD 4) recorded the
steepest decline, falling 9.3cts to $4.266 gallon, followed by an 8.7cts drop
in the Midwest (PADD 2) to $3.847 gallon.
The West Coast (PADD 5) remained the most expensive region nationwide at
$5.206 gallon, while the Gulf Coast (PADD 3) continued to post the lowest
gasoline price at $3.618 gallon, down 2cts from the previous week.
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