U.S. ethanol supplies rise to near-record high on demand ebb: EIA

Source: By Chris Prentice, Reuters • Posted: Thursday, February 4, 2016

U.S. ethanol prices <0#1ZE:> fell on Wednesday after the Energy Information Administration said stockpiles jumped 4 percent last week to the highest levels in roughly four years due to slowing demand.

Ethanol supplies rose 926,000 barrels to 22.36 million in the week ended Jan. 29, the most since the record-large stockpiles seen in March of 2012, EIA data showed. [EIA/S]

The stocks build came despite average production of the gasoline additive falling 2,000 barrels per day to an average of 959,000 bpd, the lowest rates since November.

“It’s residual weakness from the East Coast storm,” said Jerod Kitt, an ethanol analyst at Chicago brokerage The Linn Group. “It’s very typical to have a pullback.”

The late-January storm was one of the worst blizzards ever to hit the U.S. East Coast, closing roads due to heavy snow and ice, and limiting fuel demand from drivers.

Ethanol supplies could soon surpass the record of 22.713 million gallons from the week of March 16, 2012, Kitt said. Spot profit margins have improved slightly in recent days, giving some ethanol operators incentive to ramp up production at facilities that have expanded during the past few years.

U.S. farmers also increased sales of corn during the past few weeks, leaving ample supplies for ethanol makers to grind.

“We stand a fair chance of doing it by the end of the month,” Kitt said of reaching new record output.

Top ethanol producer Archer Daniels Midland Co surprised many in the industry on Tuesday when the company said it was considering options, including a sale of its dry mill ethanol plants, due to poor profitability.

Thinly traded ethanol futures <0#1ZE:> were down roughly 1 percent to $1.43 per gallon at the Chicago Board of Trade, paring earlier declines. That is above their recent multiyear low of about $1.30 reached on Jan. 13.

An analyst at a publicly traded ethanol maker said prices did not decline further as supplies were rising in the U.S. Gulf Coast region, likely bound for export markets – a small area of growth for the industry.