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- ULSD/HO Spreads June/July and July/August
April 7,2026
Overview
The June/July and July/August ULSD/HO spreads look to have hit a wall to the upside--at present.
The 2 spreads have failed to make new highs the past 2 sessions--even as the Crude Oil flat price has risen amid the tension in the Mideast.
We suspect that a few elements may have crept in to slow down/ arrest the upside price action for the ULSD/HO curve.
Are speculative traders long too many contracts? Are they more prone to reduce length now than add to it?
Last week's CFTC COT report suggests that this may be happening. Speculative length in HO futures/options on the CME rose by a mere 1,082 contracts in the week ended March 31, as shorts were covered. This bears watching when this week's CFTC data is released Friday afternoon.
We suspect more so that some demand destruction may be creeping in as diesel, gasoil and jet fuel prices have risen much more than many other refined fuels-notably gasoline.
The following was written in an article titled: "European drivers choke on rising diesel prices" : The price of diesel fuel has rocketed by more than 30 percent across Europe since the start of the Middle East war highlighting the continent's dependence on imported energy and the lingering prominence of diesel on the car market. Diesel has been worse hit than other fuels, and was already under pressure before the war. Experts say its cost will rise further. Diesel accounted for 86 percent of transport fuel sales in Latvia in 2024, 73 percent in France and 66 percent in Germany, according to FuelsEurope, a trade body which represents the refining industry. "Refineries are working at full capacity," said an expert at French energy giant TotalEnergies which has six refineries across Europe. (AFP)
In today's STEO, the EIA reduced their global oil demand forecast for 2026 by 0.6 MMBPD to 104.6 MMBPD, although that would still be an increase of 0.6 MMBPD from 2025's demand level.
The following comments were written 2 weeks ago in an article on the Schwab Network: " Higher diesel costs directly impact a wide range of industries, many of which may struggle to absorb the increase. (Diesel) Prices are approaching levels that could trigger demand destruction, with potential ripple effects across the global economy. Historically, crack spreads above $45 tend to precede sharp reversals. The May HO/CL crack spread rose to $82.36 two weeks ago when the Schwab article was published; today the HO/CL crack spread is trading just over $70.
Two weeks ago, Energy Secretary Chris Wright told CNBC that the administration is working to bring more diesel to market as fuel prices surge.
Technically, the June/July and July/August HO spreads have momentum that has turned negative on their daily charts. The spreads saw their highs last Thursday, when they posted mean reversion setups--having settled over the daily chart's upper bollinger band. The spreads confirmed the reversions Monday--settling back below the upper bollinger bands.
In the case of the June/July spread, the upper bollinger band today intersects at just under 40 cents. The July/August spread sees the band lying today at the 24.25 cents area.
The June/July spread looks to have resistance at the high from Thursday at 43.76 cents. Support comes in at the 28 cent area.
For the July/August spread, resistance is likely at the highs of the past 2 sessions at the 25 cent area. Support comes in at 17.50-17.70 cents.
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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.
Commodity trading involves risks, and you should fully understand those risks prior to trading. Liquidity Energy LLC and its affiliates assume no liability for the use of any information contained herein. Neither the information nor any opinion expressed shall be construed as an offer to buy or sell any futures or options on futures contracts. Information contained herein was obtained from sources believed to be reliable, but is not guaranteed as to its accuracy. Any opinions expressed herein are subject to change without notice, are that of the individual, and not necessarily the opinion of Liquidity Energy LLC
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