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US Spot Ethanol Gains on Wk on Supply Draw, Output Decline
4/20 5:57 PM
US Spot Ethanol Gains on Wk on Supply Draw, Output Decline OAKHURST, N.J. (DTN) --- U.S. spot ethanol prices rose across the board this week, with gains ranging from 2.5cts to 7.0cts following a bullish slate of federal supply and production data. On the session, prices ended mixed with the West Coast rallying over a nickel as tight supply availability drove buying interest. Sources said that in addition to seasonal maintenance, longer turnaround time for railcars and strong exports have prompted some short-term tightness in regional markets. The Energy Information Administration midweek reported domestic ethanol production fell to a 14-week low at 1.009 million bpd amid continued seasonal maintenance with overall ethanol supply drawn down a fifth consecutive week to 21.344 million bbl as of April 13. Supply has fallen to the lowest level since late October 2017. EIA reported Midwest PADD 2 ethanol output dropped 22,000 bpd last week to 925,000 bpd with supply in the region down 360,000 bbl to a 16-week low at 7.908 million bbl. In physical trade, prompt delivered ethanol at Kinder Morgan's Argo terminal in Chicago traded at $1.51 gallon, flat on the session but up 3.0cts from a week earlier. Ethanol under Rule 11 terms for this week rail shipment traded at $1.52 gallon, up 0.75cts with next week rail shipment reported done at $1.51 and $1.5125 gallon. New York Harbor prompt delivered ethanol barges decreased a penny on the day to $1.6050 gallon, an increase of 2.5cts for the week. At the West Coast, this week rail delivered ethanol jumped 6.0cts to $1.79 gallon, a hike of 7.0cts from the week prior. While stabilizing this week in the mid to upper 30.0cts range, 2018 D6 RINs remain under pressure amid the uncertainty over the security of the Renewable Fuel Standard that, data suggests, has also capped blending demand. Considering a climbing demand mandate under the RFS, blending activity should ramp up sharply alongside strong gasoline demand, or D6 RIN values should surge. Since this hasn't occurred, it supports comments from a recent blog by Geoff Cooper, executive vice president with the ethanol industry trade group the Renewable Fuels Association, that recent actions taken by the Environmental Protection Agency have caused demand destruction for ethanol and RINs. The recent news of small refinery exemptions issued for dozens of refineries that allows them to ignore their 2016 Renewable Volume Obligation with potentially more waivers on the way allows any RINs acquired by these refiners to recirculate in the market. This discovery was joined by the settlement between the Philadelphia Energy Solutions and the EPA amid the refiner's bankruptcy filing. EPA slashed PES' RVO by more than half for the 2016 and 2017 compliance years. Data from the EIA further suggests EPA actions have stunted demand for ethanol. Net refiner and blender inputs did increase 13,000 bpd during the second week of April to 917,000 bpd, up 5,000 bpd against year prior, but over the four-week period ended April 13 was down 6,000 bpd against the same four weeks in 2017. Considering strong demand for gasoline, which has averaged 9.145 million bpd this year through April 13, blending activity should be greater. EIA data shows net ethanol inputs have averaged 3,333 bpd or 0.4% above year prior in 2018 through April 13, which compares with implied gasoline demand that has outpaced the year-ago period over the same timeline by 298,000 bpd or 3.4%. During the 15 weeks of 2018 with data, EIA shows net refiner and blender inputs above year ago during seven weeks, and below year ago for eight weeks. Market Low High Last vs 4/19 vs 4/13 New York Harbor $1.5900 $1.6200 $1.6050 -$0.0100 $0.0250 Chicago (Terminal) $1.5000 $1.5200 $1.5100 $0.0000 $0.0800 Chicago (Rule 11) $1.5100 $1.5250 $1.5200 $0.0075 $0.0425 Houston $1.5900 $1.6200 $1.6000 -$0.0100 $0.0350 Northern Calif. $1.7200 $1.8000 $1.7900 $0.0600 $0.0700 Southern Calif. $1.7200 $1.8000 $1.7900 $0.0600 $0.0700 Phoenix $1.6200 $1.6700 $1.6300 -$0.0300 $0.0350 Pacific Northwest $1.6400 $1.6600 $1.6500 $0.0000 $0.0550 2017 D6 RINs $0.2800 $0.3050 $0.2950 $0.0000 $0.0050 2018 D6 RINs $0.3600 $0.3800 $0.3750 $0.0000 $0.0250 ($/gal) Dawn Gallagher, 1.732.531.4451, dawn.gallagher@dtn.com, www.dtn.com. (c) 2018 DTN. All rights reserved.