NYMEX ULSD Crack Hits All-Time High on Supply Tightness


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

   DAVENPORT, FL (DTN) -- The NYMEX-ULSD crack spread surged to an all-time 
high Tuesday (8/18), settling at $102.23 bbl as tight global diesel supplies; 
strong seasonal consumption and geopolitical disruptions continued to support 
refining margins.

   The crack, which measures the price difference between a barrel of NYMEX 
ULSD and West Texas Intermediate crude futures, surpassed the $100 bbl mark 
Tuesday morning well above the $42.01 bbl reported on February 27, the last 
trading session before the start of the U.S.-Israeli war with Iran. The spread 
also surpassed the previous record of $86.82 bbl reached in October 2022 
following Europe's decision to ban Russian refined product imports.

   The front-month NYMEX ULSD futures contract settled Tuesday at $4.4371 
gallon, the highest settlement on record. As trading volume rolled to a new 
month, October became the most actively traded ULSD contract on the day, with 
the October-November spread widening to 3.16cts gallon, the strongest 
backwardation registered this year, according to DTN data.

   The ULSD forward curve remains deeply backwardated, signaling strong demand 
for prompt barrels. September ULSD continued to trade at a premium to October 
as the market rolled into the next contract month.

   Global diesel availability has tightened as disruptions in the Middle East 
collide with continued Ukrainian attacks on Russian refining infrastructure. 
Recent domestic fuel shortages and intermittent refinery disruption in Russia 
have also contributed to the government's decision to restrict fuel exports. 
Meanwhile, Houthi attacks on Saudi energy infrastructure and continued 
uncertainty surrounding tanker traffic through key Middle Eastern waterways 
have added further risk to refined product flows.

   Strong overseas buying for U.S. diesel is also pulling barrels out of the 
domestic market. U.S. distillate fuel oil exports averaged 1.655 million bpd in 
May, the highest monthly rate since July 2017, when shipments averaged 1.750 
million bpd, according to the latest monthly data from the U.S. Energy 
Information Administration.

   The combination of elevated exports, seasonal consumption and constrained 
overseas refinery output has intensified competition for U.S. distillate 
barrels, keeping NYMEX ULSD prices and margins at historically elevated levels.

    




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