What is it?
The Future ULSD data series is a projection on where the wholesale price of ultra low sulfur diesel–known also as the “rack” price–is likely to be posted in various markets around the U.S., based on trends in the market that the actual companies that post the rack price look to in making their decisions. Those prices are posted by diesel suppliers at more than 100 locations around the country.
Who is interested?
Anybody with an exposure to the price of diesel fuel will be interested. In particular, those companies with exposure to the price in different cities will find value in the FULSD series. It can give a company that is a buyer of diesel fuel in multiple locations the ability to see how prices are trending in various markets, without waiting for the company-issued rack prices to actually be released. We will provide this data in cities across the U.S. It can give a buyer several hours advance indication of where the rack price is likely to be.
What does it tell me?
The rack price is made up of several key components. The price of ultra low sulfur diesel on the CME exchange is the starting point. There are five key individual markets where commercial interests freely trade diesel and other petroleum commodities: the New York harbor and related Atlantic Coast markets; the U.S. Gulf Coast; the Chicago market; a Midwest area known as Group 3, which includes the Kansas/Missouri/Oklahoma region; and the U.S. West Coast. Prices there are traded as a differential to that CME price. For example, a sale of physical diesel in the Gulf Coast market might get done at a price of ULSD CME minus 3 cts. The individual rack markets then key off the relevant physical market. Atlanta, for example, receives petroleum products via pipeline from the Gulf Coast. A company setting its rack price for Atlanta would look to see what the physical market did in the Gulf Coast before setting its number. A Milwaukee rack price would look to Chicago, and so on. Companies setting their price would look to the CME price and the physical price to set their rack number. But they might also make adjustments based on particularly local conditions. The FULSD data series will take all these inputs into account to offer a projected rack price for hundreds of locations, giving buyers a signal on where prices are headed before they are actually implemented.