Chicago ULSD falls to 2-year low

Diesel prices at Chicago's West Shore/Badger pipeline fell to a two-year low on Wednesday as inventories build and as river maintenance in Illinois impedes summer shipments.

West Shore/Badger pipeline ultra-low sulphur diesel (ULSD) traded at an 85¢/USG discount to the August Nymex on Wednesday, the narrowest cash differential to the Nymex futures contract since at least 24 May 2006. Outright ULSD prices at West Shore/Badger fell to $1.75/USG, down by 25.91¢/USG from the prior day and the lowest since 11 February 2021.

US midcontinent ULSD inventories in the week ended 7 July were the highest since 4 March 2022 at 29.63mn bl, up by 8pc on the week and 13pc on the year, according to estimates from the US Energy Information Administration (EIA).

Market participants said four months of planned maintenance on three Illinois river locks and dams may have pressured Chicago ULSD prices by limiting shipping options. Maintenance from 1 June through 30 September at the Brandon Road, Dresden Island and Marseilles locks and dams prevents barges from being able to ship product on the river over the summer.

Despite multi-year low price levels, market participants said midcontinent refiners are maxing out diesel production to take advantage of strong margins relative to gasoline.

Elsewhere in the US midcontinent, Group Three ULSD at the Great Plains held the widest premium to Chicago since at least May 2006, with Group Three settling at $2.53/USG on Wednesday, a 78.75¢/USG premium to Chicago ULSD.

By Hunter Fite and Zach Appel