The US Gulf Coast benchmark differential for ultra-low sulfur diesel plunged to a seven-year low on Oct. 20, with the move following freeze notices from the Colonial Pipeline.
Platts assessed ULSD loading onto the 60th cycle at NYMEX November ULSD futures minus 25.25 cents/gal on Oct. 20, marking an 8.25-cent decline on the day. This marked the weakest differential since Feb. 26, 2015, when value was assessed at front-month futures minus 33.25 cents/gal, according to data from S&P Global Commodity Insights.
Value dove following a freeze announcement from the Colonial Pipeline for cycles 58-60 north of Collins, Mississippi. Colonial also announced the 61st cycle was allocated.
While an allocation indicates that nominations from shippers exceed available space on the line, a freeze means the line cannot accept any more shipments for the cycle.
Prior to the announcement on Oct. 19, the last cycles frozen by the pipeline operator were cycles 25-28, which were scheduled in early summer. The 33rd cycle was the last to be allocated.
The line space market also reacted to the news, surging 4.25 cents on the day to plus 3.25 cents/gal, just above a reported bid. This marked the strongest value since May 24, when value was assessed at plus 4.25 cents/gal.
Line space value is an indirect measurement of market participant interest in scheduling barrels for a specific shipping cycle. A negative value suggests that shippers, which have take-or-pay contracts, offer their space on the line to fulfill their shipping commitments. A positive value shows interest to acquire space to ship product.
