ULSD Basis Slides in Midwest on Delayed Harvest Activity

    

   CRANBURY, N.J. (DTN) -- Basis for ultra-low sulfur diesel in the Chicago and 
Group 3 markets continued to weaken early Thursday even as the benchmark 
futures contract slid 2cts gallon, shrugging off a larger-than-expected 3.8 
million bbl draw in U.S. distillate stocks for last week.

   Energy Information Administration shows distillate stocks nationally ended 
Oct. 11 at 123.5 million bbl, 7% below year ago and 11.3% below the five-year 
average, with the supply deficit against the five-year average widening 1.8% 
last week. EIA shows PADD 2 Midwest distillate stocks were drawn down 1.1 
million bbl to 30.1 million bbl, below year ago by about 1 million bbl, and 
near flat with the five-year average.

   A delayed harvest in the Midwest following late planting due to widespread 
flooding and a strong refinery run rate in PADD 2 are factors weighing on 
regional ULSD prices. EIA shows the Midwest refinery run rate averaged 89.7% 
during the four weeks ended Oct. 11, 13.3% above the comparable year-ago period.

   Basis weakness for ULSD in Chicago began late September and accelerated with 
this week's move to cycle 3 pipeline scheduling, weakening to a 13cts discount 
to November ULSD futures on the New York Mercantile Exchange. Since Sept. 26 
when ULSD basis weakness began its trend, Chicago has weakened 13cts gallon 
compared with a roughly 3.5cts decline in futures. Weakness in the Group 3 ULSD 
basis now at a 7cts discount to the futures contract picked up steam in the 
middle of last week, down 6.5cts over that period versus no change in futures.

   Brian L. Milne, 1.402.255.8020, brian.milne@dtn.com, www.dtn.com. (c) 2019 
DTN. All rights reserved.