August Pricing Analysis - North America Middle Distillates

SUMMARY

Distillate stocks drew in all three August report weeks to about 10.9 million barrels under year-ago levels, with refiners already at 97.4% of operable capacity (EIA). At that utilization there is little room to raise output further, so an incremental September barrel comes out of stock or out of trade. The curve moved in line with that: the Colonial Pasadena M1-M12 spread widened from +$37.55/bbl to +$48.31/bbl while the prompt spread eased. ULSD NYH barges averaged 427.19 cpg against July's 391.65, up 9.07% on the month and 87.67% on the year. Underneath that, the interior half closed the dislocation July opened, Group Three coming in to -13.81 cpg from -34.66 and Chicago to -17.24 from -44.50, and it did so without the coast giving up ground: the NYH barge differential still widened to +5.10 from +2.93. Jet lagged diesel all month. Last month's note called the jet discount a snap-back risk and it deepened instead, to 47.17 cents under diesel at Colonial Pasadena.

MARKET ACTIVITY

• ULSD volumes eased and jet volumes rose, with the narrower grades thinning out.
• ULSD traded 14,054,000 against July's 14,448,000, down 2.7%, and jet 7,938,300 against 7,108,525, up 11.7%. Jet was the only one of the two that gained activity, in the month it lost the most ground on price.
• Six of the seven narrower grade lines fell between 44% and 65%, so what liquidity there was concentrated into the benchmarks rather than spreading across specifications. These are aggregates of the month's trades, not published index volumes.

PRICE ACTION

• Diesel added 9.07% at New York and 17.74% at Chicago, and four coastal assessments moved the same 29.24 cents on 10 August.
• ULSD NYH barges opened 393.22 cpg, closed 447.56, averaged 427.19 against July's 391.65 (+9.07% MoM, +87.67% YoY against Aug-25's 227.63); high 459.98 (21 Aug), low 381.12 (5 Aug), range 78.86. Open to close it rose 13.82%.
• The weekly walk: 387.87, 427.60 (+39.73 WoW), 454.19 (+26.60), 435.04 (-19.15), then a single 31 August session at 447.56. Two weeks carried the month and the fourth gave part of it back, the same shape as July at a lower amplitude.
• Colonial Pasadena averaged 416.95 cpg (+9.36%) while Group Three averaged 408.29 (+15.32%) and Chicago West Shore 402.82 (+17.74%). Chicago is the one hub where the average change is larger than the path change, +17.74% against +15.12%, so the interior gain is spread across the month rather than banked at the end.
• On 10 August four independent Atlantic and Gulf ULSD assessments moved by exactly the same +29.24 cpg, the largest single-session move of the month for each, with the interior between +27.24 and +28.24. The move was national rather than regional.
• Jet tracked diesel higher without closing any of the gap. Jet 54 Colonial Pasadena averaged 369.78 cpg (+9.33%) against ULSD Pasadena's +9.36%, and Jet NY Buckeye 379.38 (+9.85%) against ULSD NYH's +9.07%.

CROSS-MARKET DYNAMICS

• Stocks drew three weeks running against the year's highest run rate, and jet paid for it.
• Stocks fell in each of the three report weeks, to 103,391 thousand barrels from 107,159 at the end of July, while refinery utilization ran 96.2%, 97.2% and 97.4%, the highest readings of 2026 and above the matching 2025 weeks in all three (EIA). July's price gains came against two weekly builds; August's came against three draws, so the inventory picture now supports the move in a way it did not last month.
• Jet is where the middle of the barrel is clearing. The jet minus ULSD spread at Colonial Pasadena deepened to -47.17 cpg from -43.03, and jet at NY Buckeye moved to +9.60 cpg over Colonial Pasadena from +7.13. Jet and diesel compete for the same cut, so a jet discount that widens while diesel rises says the incremental barrel is going to diesel.
• The obligation cost fell on the average and not at the close. The gap between USGC waterborne ULSD 62 and the same barrel assessed ex RVO narrowed from 35.54 to 33.17 cpg on identical keys, with the ex-RVO barrel up 10.83% against the obligated barrel's 9.23%. A September blend economics mark taken off the August average understates the obligation.
• As a barometer only, ULSD NYH against Dated Brent averaged $88.41/bbl against July's $80.09/bbl, up 10.38%. Read it as direction rather than as a refining margin: a plant runs a slate of crude, not Dated Brent, so the level does not translate into what anyone actually earns.

CROSS-REGIONAL DYNAMICS

• Group Three and Chicago came back 21 and 27 cents, and the coast firmed at the same time.
• All four coastal differentials to the ULSD futures settlement rose by exactly the same 2.16 cpg: NY Buckeye +4.93 to +7.10, NYH barges +2.93 to +5.10, USGC waterborne -0.82 to +1.35 and Colonial Pasadena -2.57 to -0.40. The same move showed up four times, and the ladder kept its order.
• The interior did the larger part, Group Three coming in to -13.81 cpg from -34.66 and Chicago West Shore to -17.24 from -44.50. Both ends firmed at once. Interior barrels pulled off the coast would normally show as coastal weakness, and none appeared, which points to local production covering the interior, consistent with refiners running at the highest rate of the year in exactly those weeks.
• 18 August was the widest dislocation of the month, not the narrowest. All four coastal differentials reached their August highs that session while Group Three hit its low of -18.50 the same day; Chicago's low came two sessions later at -29.00 on 20 August.
• The two interior hubs then finished apart. Group Three closed at -4.00 on 31 August, its August high, on the largest single-session move it made all month. Chicago closed at -16.00, six cents under its 28 August high. Twelve cents between two hubs that moved together for four weeks.
• Colonial Line 2 diesel and jet line space was negative on all 21 sessions and averaged -2.10 cpg against July's -1.68, while NYH against Colonial Pasadena opened and closed at exactly 5.50 cpg on a 10.25 average against 10.40. Last month's note said a destination premium that cycle space would not pay for should resolve. Two months on, neither has moved, which suggests either that the published line space is not the constraint on physical flow it is usually read as, or that the premium is not large enough to pull barrels. Worth knowing which, because clients price off both.
• The West Coast tracked the coasts, CARB diesel Los Angeles averaging 414.61 cpg, +8.89%. Los Angeles jet was the weakest series in the pack at +5.42%. Only two West Coast series here carry independent information: San Francisco CARB diesel matches Los Angeles in every August column, and San Francisco jet is Los Angeles plus a fixed 73 cents.

CURVE STRUCTURE

• The prompt spread eased again while M1-M12 widened $10.76/bbl.
• The front eased while the deferred spreads widened, for a second month. July moved -1.51, +12.65 and +22.41 on the same three spreads, so the shape repeated at roughly half the pace at twelve months and under a third at six.
• M1-M6 is in the table because from a September prompt it reaches March, so it is the spread that spans the heating season. M1-M2 is the prompt and M1-M12 reaches next August, either side of it.
• Set that beside the inventory picture: stocks are drawing, runs are at the year's high, and the prompt eased while six and twelve months out widened. The tightness is being priced into the deferred rather than into September.
• The deferred widening shows on all three curves the pack carries: Pasadena ULSD M1-M12 +$10.76/bbl, NYH ULSD M2-M12 +$11.91/bbl, Pasadena jet M1-M12 +21.54 cpg. The narrowing front is visible at Pasadena on both ULSD and jet; the NYH series has no Period 1 value, so it confirms the back and says nothing about the front.

PRICE VOLATILITY

• Every series got calmer in a month when flat prices rose between 5% and 18%.
• All seven series the pack tracks fell, the three in the table among them. Three reached six-month lows: jet at Colonial Pasadena at 4.57, Group Three ULSD at 5.55 and the jet minus ULSD spread at 12.68. ULSD NYH at 5.85 is down from 10.20 but still above May's 4.53.
• Jet went from the most volatile flat price in July at 11.48 to the calmest series of any kind in August at 4.57, and it did so while getting cheaper against diesel. The discount widened as dispersion fell, so the loss of relative value does not show up in the volatility measure.
• The complex is now calmer than at any point since May while sitting 75% to 90% above year-ago levels. Risk sized on July's dispersion is larger than August's warrants.

SOMETHING TO WATCH

• Jet, which July said would snap back and which has settled instead:
  • Observation: the Colonial Pasadena spread deepened to -47.17 cpg from -43.03, close to $20/bbl under diesel, hit its low of -57.00 on 21 August and closed -48.50, while its own dispersion fell to 12.68 from 15.56.
  • Why it matters: jet and diesel compete for the same middle cut. A discount this wide and this steady going into the season when diesel demand rises is consistent with jet clearing as the residual cut rather than setting the bid. With stocks 10.9 million under year-ago levels and the deferred spreads widening, the discount widening further looks at least as likely as it correcting, which is the reverse of what July's note said.
  • What to monitor: the daily jet minus ULSD close at Colonial Pasadena; jet at NY Buckeye against Colonial Pasadena, which widened to +9.60 cpg from +7.13.
• Which interior hub is telling the truth about the repair:
  • Observation: Group Three closed at -4.00 cpg on 31 August, its August high, on its largest single-session move. Chicago closed at -16.00, six cents under its 28 August high, after the two moved together all month.
  • Why it matters: a 21 and 27 cent repair is large enough that where it settles matters more than the move. Group Three holding near flat would mean July's interior deficit has gone; Group Three retracing toward Chicago would mean August was a squeeze on one hub and the deficit is intact.
  • What to monitor: the Group Three and Chicago West Shore differentials to the futures settlement, daily; weekly EIA PADD 2 distillate stocks.
• Whether stocks can be rebuilt at all before winter:
  • Observation: three consecutive weekly draws to 103,391 thousand barrels, about 10.9 million under the aligned year-ago weeks, with utilization at 97.4% and refiner crude input at 17.4 million b/d (EIA).
  • Why it matters: there is little throughput headroom left, so the incremental barrel has to come from stock or from imports. The curve widened six and twelve months out while easing the front, which is the shape that follows from that.
  • What to monitor: weekly EIA distillate stocks and utilization; Pasadena M1-M6, which widened $3.95/bbl in August and spans the heating season.

Note: All figures, prices and market activity referenced in this report are based on the period covered by this monthly update.