Chicago CBOB-ULSD Spread Narrows Ahead of Winter


   
Miguel E. Andujar
DTN Refined Fuels Market Reporter

   DAVENPORT, FL (DTN) -- Limited diesel supplies and low seasonal demand for 
gasoline continued narrowing the spread between both products in the Chicago 
spot market on Friday (12/12).

   The Chicago CBOB-ULSD spread narrowed to 36.61cts on Friday, below the 
45.88cts mark recorded the same day last week, and it was narrower than 
62.87cts reported month-over-month, according to DTN data.

   However, the spread between Chicago CBOB and ULSD remains wider than both 
the year-to-date average of 23.90cts and the the 17.27cts average during the 
same period of last year, indicating ULSD continues to trade at a relatively 
deep discount to gasoline. Still, the move highlights a clear shift in relative 
value as the Midwest market transitions into winter demand.

   Chicago ULSD spot prices  have outperformed CBOB prices since late November 
following a disappointing summer driving season for gasoline.

   The spread has been supported by firmer diesel fundamentals. Midwest (PADD 
2) ultra-low sulfur diesel inventories amounted 1.4 million bbl in the week 
ended December 5, below the same time last year, tightening supply coverage as 
colder weather approaches, according to the most recent U.S. Energy Information 
Administration data. Average U.S. diesel retail prices were at $3.635 gallon 
last week, 23cts up year-over-year, the same EIA data showed.

   A source familiar with Midwest refined-products markets said, "Based on the 
fundamentals, you could argue ULSD still looks undervalued relative to CBOB, 
especially with a tighter distillate market as the region moves deeper into 
winter."

    




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