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Gulf Coast Ultra Low Sulfur Diesel (ULSD) 
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Gulf Coast Ultra Low Sulfur Diesel (ULSD) (Physical) futures are an outright diesel fuel contract between a buyer and a seller. The contract:

  • Serves as a proxy for hedging heating oil
  • Enables customers to manage and trade the volatile price spread between heating oil and diesel
  • Provides price transparency for ULSD

Things to know:

  • Traded via open outcry, electronically on the CME Globex platform, and off-exchange for clearing only through CME ClearPort
  • Final settlement price is based on the average-weighted price of trades done in the closing range on termination day

About Gulf Coast Ultra Low Sulfur Diesel (ULSD)
The Gulf Coast ULSD futures contract, coded LU, features physical delivery of fungible 61 Grade ULSD (15 PPM sulfur) into the Colonial Pipeline ratably in increments of 25 contracts during each cycle of the delivery month. Delivery takes place following termination of trading. The final settlement price is based on the average-weighted price of trades done in the closing range on termination day. Delivery shall be made F.O.B. the Colonial Pipeline at the injections station selected by the Seller at Pasadena, Texas; Houston, Texas; Hebert, Texas; Port Arthur, Texas; Lake Charles, Louisiana; Krotz Springs, Louisiana; Baton Rouge, Louisiana; Collins, Mississippi,; and Moundville, Alabama.

Government regulations currently require diesel fuel refiners to produce a minimum of 80% of diesel fuel as ULSD. In 2010, refiners will be required to produce the entire diesel pool as ultra low-sulfur grade. The Gulf Coast serves as one of two key trading centers in the cash market, the other being New York.