Chicago diesel prices fetched the deepest discounts to the Nymex ultra-low sulphur diesel (ULSD) contract in 21 months today, offsetting Nymex gains amid waning buying demand and increased regional stockpiles.
ULSD prices at the Buckeye Complex and the West Shore/Badger and Wolverine pipelines reached the largest discounts to the Nymex contract since April 2020, with those spreads widening between 2.5¢/USG and 3¢/USG depending on location.
Market participants said buying demand for ULSD has declined, with some US midcontinent farmers having already begun to stock up for the spring planting season in late December. Additionally, midcontinent ULSD inventories rose to a 12-week high last week at 29.9mn bl, marking a 6.8pc increase from the prior week and up by 5.7pc from the same week in 2021, US Energy Information Administration (EIA) estimates show. This came even as midcontinent refiners cut ULSD production by 7.7pc to the lowest since early September at 1.09mn b/d.
West Shore/Badger pipeline ULSD traded between a 19¢/USG and 21¢/USG discount to the Nymex today, widening by 3¢/USG from yesterday to levels last seen in April 2020.
Buckeye Complex and Wolverine Pipeline ULSD also traded at the widest discounts to the Nymex in 21 months at 15.5¢/USG and 18¢/USG, respectively.
The increase in discounts to the Nymex partially offset Nymex gains in Chicago, as outright Buckeye Complex ULSD prices rose by 0.56¢/USG to $2.439/USG.
But the widened spreads to the Nymex have weighed on arbitrage economics from the US Gulf coast. Buckeye Complex ULSD at Hammond, Indiana, saw its discount to the Gulf coast increase by 2.3¢/USG to 9.575¢/USG today. The arbitrage opportunity for sending Gulf coast ULSD to the Buckeye Complex has been unviable on paper since 9 December.
Further south, Magellan Pipeline ULSD at Tulsa, Oklahoma, traded at a 13.75¢/USG discount to the Nymex today, widening by 1.38¢/USG from the previous session to the largest spread since May 2020.
