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
Sources said that in addition to seasonal maintenance, longer turnaround
time for railcars and strong exports have prompted some short-term tightness in
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
Data from the EIA further suggests EPA actions have stunted demand for
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
Dawn Gallagher, 1.732.531.4451, email@example.com, www.dtn.com. (c)
2018 DTN. All rights reserved.