ULSD/HO March April Spread

Overview

The March April ULSD spread is making a fresh high today. This is not surprising given the strength of the flat price for ULSD and for NG. We mention NG since we believe that that contract's strong performance this week is a clear signal of weather demand, which will also underpin ULSD.
The March April spread is likely also getting a boost from the strength being seen in the expiring February March spread, which has risen today to near the highs seen a few days ago.
But, we wish to add that we do not see the March April spread experiencing quite the volatility that February March has seen.
Also, the one negative that may disrupt the upside for the spread may come from an increase in distillate imports into the US that may have been attracted by the strong US price-and also conversely a dip in distillate exports due to the same narrative of too strong a US distillate price. Some of that was seen in this week's DOE data as distillate exports fell by 343 MBPD while exports rose by 38 MBPD.

Technically,  the March April 2023 ULSD spread had some strong resistance at 15 cents and below that even some resistance was seen at 1285-1305. The March April 2022 ULSD spread saw some resistance at 1185-1200 and had a high of 1380.  We mention those prior years so as to give some idea as to where the current 2026 spread may see some upside resistance.
This year's 2026 spread should see support on pullbacks toward 818 and then 708-715.
Momentum for the spread is still slightly negative, although today's rally looks poised to see the momentum turn upward come Monday.

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Disclaimer

This article and its contents are provided for informational purposes only and are not intended as an offer or solicitation for the purchase or sale of any commodity, futures contract, option contract, or other transaction. Although any statements of fact have been obtained from and are based on sources that the Firm believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed.

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