MARKETWIRE ALERTS
Barani Krishnan
DTN Refined Fuels Market Reporter
MARKETWIRE ALERTS
MarketWire Afternoon News Sept 15:
Updated at 5:00 PM ET
HEADLINES:
-- Chicago ULSD, CBOB Basis Surge 32cts in Rare Parity
-- API: Crude Stocks Jump 7.14M Bbl on Week
-- Analysis: $8 Cal. Diesel May Only Be Start of Saudi Crisis
-- Valero Port Arthur Report Crude Unit Leak
-- EIA: U.S. Retail Diesel Averages Record High of $6.285 Gal
-- U.S. Rack Gasoline Rebounds 4.51cts; ULSD Above $5
-- U.S. Rack Gasoline Rebounds 4.51cts; ULSD Above $5
NEWS
Chicago ULSD, CBOB Basis Surge 32cts in Rare Parity
Physical fuel markets across the Midwest surged in rare lockstep Tuesday
(9/15), with Chicago ULSD and CBOB spot basis rising equally as traders
scrambled to cover supply shortfalls triggered by a power outage at
ExxonMobil's 251,000 bpd Joliet refinery in Channahon, Illinois.
Energy futures rallying in response to a worsening Saudi crude exports
deficit added due to the upside in most PADD 2 fuels.
Chicago CBOB basis surged 32cts on the day to stand at a 36cts gallon
premium over October NYMEX RBOB futures, while Chicago ULSD basis matched the
32ct jump to cross into positive territory at a 15cts gallon premium over
October NYMEX ULSD.
"CBOB is leading the market, basically," said one Midwest fuels trader,
pointing to emergency spot-market buying following the Joliet plant trip. "It's
almost everything driven by one of the biggest gas producers in Chicago having
a power outage, so they have to cover supply. If anybody has barrels, they're
going to price them quite handsomely."
Although power was restored to the Joliet refinery by Sunday evening, the
plant remained offline for safety inspections, status assessments, and unit
stabilization. Producing roughly 9 million to 11 million gallons of refined
fuels daily for PADD 2 distribution, the unplanned outage abruptly stripped key
supply from the Midwest market, leaving Exxon short on immediate pipeline
commitments and driving open-market spot buying to cover obligations.
Eastern distribution networks mirrored the twin rally. Buckeye Complex and
Wolverine ULSD basis both advanced 32cts to a 15cts premium to October futures,
while Buckeye Complex and Wolverine CBOB basis also surged 32cts to reach a
36cts premium.
Midcontinent markets showed far less momentum. Group 3 ULSD basis edged 2cts
higher to an 8cts gallon discount to October futures, while Group 3 CBOB basis
slipped 0.5ct to a 13.5cts premium.
Aviation fuels bucked the trend. Chicago jet fuel basis slipped 1ct to an
80cts gallon discount to October ULSD futures, while Group 3 jet fuel dropped
15cts to a 95cts discount.
The physical gains aligned with a strong rally in underlying futures as
escalating Houthi attacks on Saudi oil infrastructure raised the geopolitical
risk premium in energy
October NYMEX ULSD climbed $0.2868, or 5.80%, to settle at $5.2483 gallon
after peaking at $5.2842. October NYMEX RBOB advanced $0.1507, or 4.58%, to
finish at $3.4678 gallon after touching $3.4752 earlier in the session.
API: Crude Stocks Jump 7.14M Bbl on Week
U.S. commercial crude oil stocks increased by 7.14 million bbl during the
week ended September 11, while gasoline and distillate fuel inventories also
rose, the American Petroleum Institute (API) reported on Tuesday (9/15).
API reported a crude inventory draw of 246,000 bbl at the Cushing, Oklahoma,
delivery point for NYMEX West Texas Intermediate futures.
Gasoline inventories increased by 1.46 million bbl during the reported week.
Distillate fuel oil inventories rose by 1.61 million bbl during the week.
Analysis: $8 Cal. Diesel May Only Be Start of Saudi Crisis
Heightening strikes on Saudi Arabia's key energy infrastructure are sending
ripples across the global crude complex, with U.S. refiners in the West Coast,
particularly, bearing a supply brunt that has already driven Californian diesel
to record highs above $8 gallon.
While refiners in PADD 5 face the most severe supply pressure and consumers in
the region the greatest financial strain, the impact is also being felt across
the United States as the fallout from the Saudi supply squeeze cascades across
regional fuel hubs.
Soaring fuel prices have also yielded record refining margins for operators
like Marathon, Phillips 66, and BP, as diesel cracks reach all-time highs above
$100 bbl.
At pumps, Californian retail diesel leaped 27.5cts during the week ended
September 14 to an all-time high of $8.039 gallon, while the West Coast average
soared 26.3cts to $7.250 -- beating the national record of $6.285, Energy
Information Administration data showed. At the rack, Los Angeles ultra-low
sulfur diesel (ULSD) surged 33.36cts to average $5.3058 gallon on the week.
The dramatic price action on the West Coast reflects deep physical
vulnerabilities. Geographically isolated from inland pipeline networks,
California and Pacific Northwest processors rely heavily on waterborne
medium-sour crude imports, including Saudi Light.
With sustained Houthi attacks forcing the shut-in of Saudi Aramco's 7
million bpd East-West pipeline and choking off the Red Sea port of Yanbu, PADD
5 refiners are stranded with dwindling baseline allocations. Processors are
being forced to bid aggressively for alternative, higher-freight barrels from
Latin America and West Africa, passing these steep crude acquisition costs
directly to end-users.
"West Coast refiners have already weaned themselves off Saudi oil earlier
this year," DTN analyst Karim Bastati said, noting that Chevron's 245,000 bpd
Richmond refinery, for instance, received its last delivery in April, replacing
the Saudi stream with sour grades from Canada and Ecuador.
"Still, a tightening supply of the type of crude needed forces refiners to
pay higher premiums to secure a cargo on the spot market before they can set up
long term delivery contracts," Bastati added.
Nationwide Crunch
As such, recent buyers of Saudi oil -- including Motiva's 630,000 bpd Port
Arthur plant in Texas and PBF's 105,000 bpd Paulsboro refinery in New Jersey --
will likely have to look for alternatives before Aramco's tanks in Yanbu and
Sidi Kerir run dry from an extended shutdown of the East-West pipeline. On the
East Coast, DTN data showed New York Harbor ULSD rack prices climbing 37.24cts
to average $5.0596 gallon over the current week.
While PADD 5 absorbs the direct physical hit, refiners in the central and
southern U.S. are benefiting from secondary market dynamics -- processing
cheaper domestic crude while selling products into a soaring global market.
In the Midwest, refiners remain physically protected from Middle Eastern
disruptions due to direct pipeline access to Western Canadian Select and Bakken
crudes. But both retail and rack prices in the region tracked global futures
higher. PADD 2 retail diesel climbed 30.4 cents over the past week to $6.250
gallon, the EIA reported. On the rack front, DTN data showed Chicago ULSD
rising 82.04cts, or 18.02%, to $5.3732 gallon over the week ended September 15.
In PADD 3, abundant Permian shale supply insulates most operators from
physical crude shortfalls, though Saudi Aramco-owned Motiva now faces
logistical rerouting challenges or domestic crude substitution. Reflecting
broader Gulf Coast product pull, DTN data showed USGC ULSD rack prices
advancing 39.11cts to average $5.0159 gallon.
The EIA reported that PADD 3 diesel gained 27.3cts over the past week to
$6.027 gallon as European and Asian buyers pulled U.S. middle distillates
overseas to backfill international shortfalls.
With U.S. refinery utilization hovering near maximum capacity -- at 96.8%
during the week ended September 4, as per EIA data -- middle distillate stocks
remain near historic seasonal lows. Higher demand for diesel in PADD 2 as the
Midwest enters fall season harvesting and extended Saudi export outages are
only likely to keep refining margins and retail pump prices elevated.
Valero Port Arthur Reports Crude Unit Leak
Valero Energy reported Tuesday (9/15) an emissions event at its 360,000 bpd
Port Arthur refinery in Texas following a process-fluid leak at Crude
Distillation Unit 146, according to a filing with the Texas Commission on
Environmental Quality (TCEQ).
The leak occurred on Sunday (9/14) at 9:00 a.m. CT and continued until 2:30
p.m. CT, lasting 5 hours and 30 minutes, according to the filing.
Valero reported an unforeseeable leak of process fluid at the crude unit
resulted in volatile organic compound emissions to the atmosphere. The refinery
estimated 17.96 pounds of benzene were released during the event.
Operators established safe operating conditions and initiated procedures to
stop the emissions and repair the leak, according to the filing.
Crude distillation units are the first major processing step at a refinery,
separating crude oil into streams that feed downstream units used to produce
gasoline, diesel, jet fuel and other refined products. The filing did not
indicate whether refinery production was affected.
The Port Arthur refinery primarily produces gasoline, diesel and jet fuel.
DTN reached out to Valero Energy for additional details but did not get an
immediate response.
EIA: U.S. Retail Diesel Averages Record High of $6.285 Gal
U.S. pump prices for diesel hit a new record high this week, surging 31.8cts
to $6.285 gallon, to surpass last week's historical peak, Energy Information
Administration (EIA) data showed Monday (9/15).
The national retail average for diesel stood $2.546 above year-ago levels,
the EIA data for the week ended September 14 showed. In the prior week to
September 7, the pump price averaged $5.967 gallon.
Diesel's largest price increase in the latest week was in the Lower
Atlantic, or PADD 1C region, where the pump price climbed 49.1cts to $6.096
gallon. This was followed by the East Coast, or PADD 1, region which rose
41.4cts to $6.158 gallon.
The Midwest, or PADD 2, gained 30.4cts to $6.250 gallon. In the Gulf Coast,
or PADD 3, diesel advanced 27.3cts to $6.027 gallon.
California recorded the highest diesel prices for any U.S. state, soaring
27.5cts on the week to $8.039 gallon. The West Coast, or PADD 5, region climbed
26.3cts to $7.250 gallon. The Rocky Mountain, or PADD 4, region rose 26.1cts to
$6.066 gallon.
U.S. Rack Gasoline Rebounds 4.51cts; ULSD Above $5
Gasoline prices rose across all five PADDs while ultra-low sulfur diesel
(ULSD) increased in four regions as crude oil and refined-product futures
remained elevated on continued Middle East supply concerns.
Nationwide conventional unleaded gasoline rack prices averaged $3.4706
gallon, up 4.51cts from Monday's $3.4255 gallon, according to DTN data.
ULSD rack prices averaged $5.2680 gallon, up 1.43cts from the previous
trading session's $5.2537 gallon.
The rebound in rack prices came as energy markets continued to assess supply
risks after Saudi Arabia shut its critical East-West pipeline, which bypasses
the Strait of Hormuz, following damage from drones launched from Iraq.
NYMEX WTI futures traded near $102.18 bbl Tuesday morning after reaching a
session high of $104.21 bbl. Front-month New York Harbor ULSD rose about 10cts
to $5.0655 gallon, while RBOB gasoline gained roughly 3cts to $3.3476 gallon.
Refining margins remained especially supportive for distillates. The diesel
crack traded near a record $110.28 bbl, up $3.32, or 3.1%, on the day, compared
with a gasoline crack of $38.47 bbl, up $0.55, or 1.5%.
ULSD racks increased in four of the five PADDs. Midwest values posted the
largest advance, rising 3.92cts to $5.2110 gallon. East Coast prices increased
1.47cts to $5.0927 gallon, Gulf Coast values rose 1.45cts to $5.1207 gallon and
Rocky Mountain prices added 0.99ct to $5.3413 gallon. West Coast ULSD fell
2.44cts to $5.8852 gallon. PADD 5 maintained the widest premium to the national
average at 61.72cts, while PADD 1 held the largest discount at 17.53cts.
Gasoline racks increased across all five regions. Midwest values posted the
largest gain, rising 12.31cts to $3.3401 gallon, followed by Rocky Mountain
prices, which advanced 5.36cts to $4.0209 gallon. Gulf Coast gasoline rose
2.52cts to $3.2748 gallon, East Coast values increased 1.54cts to $3.2876
gallon and West Coast prices added 0.67ct to $4.1385 gallon.
PADD 5 maintained the largest gasoline premium to the national average at
66.79cts, while PADD 2 held the widest discount at 13.05cts.
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