FULSDO: Forecasted Overnight Change in ULSD Rack Price

Hannah BlalockEnergy - Price

What is it?

The Forecasted Overnight Change in ULSD Rack price is the difference (in cents) between the current rack price for a gallon of Ultra Low Sulfur Diesel (ULSD), and the forecasted price tomorrow. Based on more than a year of history, this forecast predicts the up/down direction correctly more than 90% of the time. This is more useful for map display than the FULSD index.   

Who is interested?

Anybody with an exposure to the price of diesel fuel will be interested. But 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.

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