US EIA says ethanol output, stocks fall on week

Houston (Platts)--18 Apr 2018 600 pm EDT/2200 GMT

US ethanol production averaged 1.009 million b/d in the week ended April 13, down 25,000 b/d from the prior week, Energy Information Administration data showed Wednesday.

Compared with the same week last year, production was 16,000 b/d, or 1.61%, higher. Production was in line with market expectations, though on the low end. Seasonal maintenance was expected to continue trimming output rates until May and some market participants had expected steep cuts.

Total stocks fell for the fifth consecutive week to their lowest level since October amid high demand during turnarounds. The fall was larger than market expectations. Inventories shed 502,000 barrels to 21.344 million barrels. Total inventories were 1.690 million barrels below the corresponding week last year, just the fifth time so far this year that stocks have been down from 2017 levels.

The three regions with the most storage -- the Midwest and the East and West Coasts -- remained down from the corresponding week in 2017 after falling there in the previous reporting week.

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The Midwest shed 360,000 barrels for the largest decline. The Midwest is host to the largest number of ethanol plants out of all US regions. With turnarounds currently happening at plants in the region inventories could continue to fall in the coming weeks.

Strong export demand out of the Gulf Coast and high New York Harbor premiums have encouraged producers to sell product in storage and move ethanol out of the region.

The East Coast shed 202,000 barrels for the second largest decline. Market participants have continued to hunt for product as much of the rail market has been diverted to Houston amid plant turnarounds.

Premiums in the New York Harbor market, the largest trading hub on the East Coast, remain high. May barges traded at a 9.5-cent premium to the May Chicago ethanol swap Tuesday as traders continued to bid higher while looking for available product.

With plants down for maintenance and exports strong in the Gulf Coast market, participants have tried to buy rail cars east of the Mississippi River to supply New York Harbor. Until turnarounds are over, premiums could remain high in the East Coast hub.

The Gulf Coast shed 36,000 barrels. Premiums in Houston have remained strong as exports continued to flow out of the region. With plants down for maintenance, some market participants are struggling to find rail cars to supply the Houston market. What rail is available is largely dedicated to export-specification product, sources have said.

S&P Global Platts assessed the FOB Houston market at a 9-cent premium to the May Chicago ethanol swap Tuesday.

The West Coast added 84,000 barrels despite the EIA again reporting no imports into the region. The EIA has not reported any ethanol imports since the week ended December 1, 2017. The West Coast is the most common destination for imports as Brazilian sugarcane-based ethanol generates both D5 RINs and Low Carbon Fuel Standard credits under California's LCFS.

With Brazilian prices falling as the new crop begins some imports could begin to arrive. But the recent tumble in D5 RIN prices could at least partially offset the cheaper ethanol in Brazil.

The four-week rolling average of the refiner and blender net ethanol input was unchanged at 906,000 b/d, while the weekly average climbed 13,000 b/d to 917,000 b/d.

The four-week rolling average of gasoline demand, represented by product supplied, climbed 133,000 b/d to 9.385 million b/d, while the weekly average surged 584,000 b/d to 9.857 million b/d.

The ethanol blending rate, calculated by dividing the refiner and blender ethanol input by gasoline demand, dipped to 9.65% from 9.79% the previous week.

--Josh Pedrick,
--Edited by Derek Sands,

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