Midwest Fuel Basis Soar on Firm Demand, Low Supplies


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

    

   DAVENPORT, FL (DTN) -- Midwest ultra-low sulfur diesel (ULSD) basis 
continued moving higher Monday (5/11), driven by firm demand as buyers pay 
steep premiums for prompt barrels across the region amid tight supply.

   The ULSD basis in Chicago and Wolverine Pipeline was assessed at a 90cts 
premium to June NYMEX ULSD futures, both increasing 14.50cts on the session, 
according to DTN Energy data. At the Buckeye Storage Complex, ULSD was assessed 
at an 80cts premium to the same benchmark, 4.50cts above the prior trading 
session.

   The move marked the strongest hike across all pipes since April 30, when 
Chicago, Wolverine and Buckeye ULSD basis was assessed at a $1.055 premium to 
front-month ULSD futures contract, the same data showed.

   Midwest on-highway diesel retail prices averaged a record $5.742 gallon, 
above the national retail average of $5.640 gallon on the week ended May 4, 
according to U.S. Energy Information Administration data released last week.

   Meanwhile, Chicago jet fuel basis was assessed at a 25cts premium to June 
NYMEX ULSD futures, down 10cts on the day, after trading at 35cts premium for 
three consecutive trading sessions.

   In the Group 3 market, jet fuel, commonly referred to as "Q," weakened by 
7cts to a 15cts discount to June ULSD futures, while other refined products 
showed limited changes.

   Mirroring the strength in distillates, Chicago CBOB gasoline basis was 
assessed at a 30cts premium to June NYMEX RBOB futures, up 9cts on the session, 
with Buckeye reflecting the same direction. Wolverine CBOB was assessed at a 
40cts premium to the same benchmark, maintaining a 10cts premium over Chicago 
and Buckeye markets.

   Bids and offers in the Midwest spot market continue to reflect wider 
spreads,  though buyers have shown a willingness to pay premiums of as much as 
20cts gallon their initial bids. 

   "Honestly there is not much information out there; nobody is talking," a 
source familiar with Midwest refined product trading said.

   Supply tightness in the region has been attributed to fewer supplies from 
the U.S. Gulf Coast --refined products have been diverted to the export market 
-- and to possible production issues.

   "Whether it's related or not is unclear, but Phillips 66 Wood River has 
remained in maintenance longer than originally scheduled, and that's not 
unusual with refinery turnarounds."

   The Phillips 66 Wood River Refinery, the second-largest refinery in the 
Midwest with a processing capacity of 367,000 bpd, began a scheduled 45-day 
spring turnaround at the end of February. Phillips 66 did not respond to a 
request for comment regarding the refinery's operating status as of publication 
time.

   Last week, refinery utilization in the Midwest rose to 86% of operable 
capacity from 84.9% the prior week. This was also lower than the 88.8% 
utilization rate reported for the same week of the prior year, according to EIA 
data. 

   Distillate fuel oil inventories in PADD 2 dropped by 1 million bbl on the 
week to 24.9 million bbl, but remained slightly above the 24.7 million bbl 
reported in the same week of the previous year, the EIA said last week. 
Distillate fuel oil imports averaged 12,000 bpd, up from 6,000 bpd the prior 
week and above the 8,000 bpd imported a year earlier.




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