The US Gulf Coast ULSD cash differential rebounded Thursday after a bearish stock report from the US Energy Information Administration, aided by the continued slowing of exports and closed arbitrages in the domestic market.
S&P Global Platts assessed Gulf Coast ULSD at NYMEX February ULSD futures minus 6.75 cents/gal, up from minus 7.40 cents/gal on Wednesday.
"The basis bounced back today on scheduling day, but it's still relatively weak," a source said.
Inventories of Gulf Coast ULSD rose 513,000 barrels in the week ended January 13 to 45.90 million barrels, the third-highest level on record, according to EIA data. Stocks have built nearly 12 million barrels over the last three reporting weeks. The last time inventories were higher was in April.
One source said the market has benefited from an improving refinery margin, as the ULSD-Louisiana Light Sweet crude crack was valued at $11.91/b and $1.10/b over the 87-unleaded crack against the same crude. In contrast, the gasoline crack had averaged a $1/b advantage to the diesel crack in the previous 18 trading days dating to December 20, the last day diesel had the edge.
"Refinery margins are much better this month than most thought we would see, so runs have remained high," another source said. "They were off this week, but I think that's more to do with the handful of problems refiners had."
The Gulf Coast basis was relatively volatile Thursday, with early trading heard as low as minus 8 cents/gal. Trades in the Platts Market on Close assessment process ranged from minus 7.50 cents/gal to minus 6.50 cents/gal. The basis fell in the morning after EIA data showed that Gulf Coast barrels were building on continued closed arbitrages to both the Midwest and the Atlantic Coast, as well as exports to Europe, while Latin American exports slowed.
"After record exports in December, [there has been] a bit of a lull in January, which in turn is adding to stock builds," a source said. "Arbs haven't really worked in the domestic market. The Northeast is rather full and pressuring barrels."
