September Pricing Analysis - North America Middle Distillates

SUMMARY

ULSD NYH barges averaged 491.05 c/gal, up 14.95% on August, with Gulf and Russian diesel exports still far below normal (IEA). Jet 54 Colonial Pasadena rose 19.00% against 13.87% for Pasadena ULSD, and the jet discount narrowed from 50.00 to 15.00 c/gal as US jet output fell during refinery maintenance (EIA); last month's note expected it to widen. Chicago ULSD rose 99.63 c/gal in four sessions after the Joliet refinery lost power on 13 September, and CARB diesel rose 22.92% on California's lowest CARB diesel stocks of the year (CEC). With maintenance cutting jet output, the jet discount is likely to stay narrow.

MARKET ACTIVITY

Jet volume more than doubled and ULSD volume rose 67.4%.

• On the aggregate of the month's trades (not published index volumes), jet traded 17,740,000 bbl (+121.4%) and ULSD 23,522,500 (+67.4%).

PRICE ACTION

• ULSD NYH averaged 14.95% above August, with Chicago and Los Angeles up more than 20%.
• ULSD NYH barges averaged 491.05 c/gal against 427.19 (+14.95% MoM; +110.08% YoY against 233.74); high 540.15 on 16 Sep, low 460.52 on 4 Sep.
• Colonial Pasadena ULSD rose 13.87%, Group 3 18.41%, Chicago West Shore 20.64% and CARB diesel Los Angeles 22.92%.
• Pasadena ULSD fell 39.50 c/gal to its 441.21 low between 22 and 25 Sep, after the President said he supports a US diesel export ban.

CROSS-MARKET DYNAMICS

Jet closed most of its discount to diesel: Pasadena jet ended 15.00 c/gal under ULSD from 50.00.

• The jet minus ULSD spread at Colonial Pasadena averaged -45.13 c/gal over 1 to 18 Sep and -17.88 over 21 to 30 Sep (August -47.17). In New York, jet at NY Buckeye went from 42.50 under NYH barge ULSD to 22.00 over.
• The cause was supply: US jet output fell from 2,022 to 1,852 kb/d between the weeks to 4 and 25 Sep, and East Coast jet stocks fell to 9,685 thousand barrels from 11,239 (EIA), while air passenger numbers were 2.0% below September 2025 (TSA).
• The discount widened back from 5.00 to 15.00 c/gal in the last week after Russia extended its diesel export ban to 31 Oct.

CROSS-REGIONAL DYNAMICS

Chicago ULSD rose 99.63 c/gal in four sessions after Joliet shut, and Los Angeles diesel jumped.

• Chicago West Shore ULSD went from 480.15 c/gal on 14 Sep to 579.78 on 18 Sep, 70.00 over Group 3, and its basis to NYMEX ULSD from -16.00 to +74.00, after Joliet lost power on 13 Sep. Midwest distillate stocks fell from 28,790 to 25,937 thousand barrels in two weeks (EIA), and Chicago fell 65.83 c/gal on 21 Sep as Joliet's units restarted.
• Group 3 basis averaged -1.71 c/gal against -13.81 in August, so the interior repair from July held.
• CARB diesel Los Angeles basis went from -5.00 to +50.00 c/gal on 2 Sep and averaged +31.10, as California CARB diesel stocks hit their 2026 low of 1,121 thousand barrels (CEC).

CURVE STRUCTURE

Backwardation widening led by the prompt: M1-M2 widened $3.38/bbl to $10.62.

• M1 fell $1.23/bbl against $5.13 for M12. M1-M6, which runs from the October prompt to March across the heating season, widened only $1.11, so the added tightness sits at the front. Jet M1-M12 widened to 131.94 c/gal from 113.49.

PRICE VOLATILITY

Flat prices calmed further while the jet minus ULSD spread became the volatile series.

• Jet 54 Pasadena (4.25) and Group 3 ULSD (4.29) are at six-month lows; Chicago rose to 8.13 on the outage. The jet minus ULSD spread's CV rose to 47.10 from 12.68: the risk moved into the jet and diesel spread.

SOMETHING TO WATCH

• Jet against diesel:
  • Observation: Pasadena jet closed 15.00 c/gal under ULSD; New York jet closed 22.00 over New York diesel.
  • Why it matters: the narrowing came from lower jet output during maintenance, and Russia's ban extension also supports diesel, so the spread is likely to stay narrow while maintenance lasts.
  • What to monitor: EIA jet output and East Coast jet stocks; jet minus ULSD at Pasadena.
• Chicago after Joliet:
  • Observation: with Joliet back online by 26 Sep, Chicago ULSD closed 466.31 c/gal, under its 469.24 pre-outage average.
  • Why it matters: Midwest distillate stocks fell 2.85 million barrels; a slow rebuild would lift Chicago.
  • What to monitor: EIA Midwest utilization and distillate stocks; Chicago ULSD against Group 3.
• A US diesel export ban:
  • Observation: the President backed a diesel export ban on 22 Sep; Pasadena ULSD hit its 441.21 low on 25 Sep.
  • Why it matters: a ban would hold export-bound diesel on the Gulf Coast and lower Gulf prices against the coasts that import.
  • What to monitor: any federal action on diesel exports; Gulf ULSD against NYH barges.

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