Brazilian light fuel consumers to keep favoring hydrous ethanol

Santos — Hydrous ethanol in Brazil continues to be attractive to consumers as Petrobras announced further increases to gasoline prices. The price parity of ethanol against gasoline was 63.57% in the Southeast of Brazil and 67.80% in the Center-West for the week ended June 6, data from the National Petroleum, Biofuel and Natural Gas Agency, ANP showed.

Hydrous ethanol offers an economic advantage whenever its price in under the 70% of the price of gasoline due to ethanol's lower energy content.

State-led oil company Petrobras announced an average increase in the gasoline ex-refinery price of Real 132.70/cu m, June 6. This can also be viewed as a 9.7% price increase at the Paulinia fuel hub, one of the most relevant regions in Southeast Brazil, the increase would result in retail prices in the region moving close to Real 1.500/cu m. This was the fifth price increase by Petrobras since May 7.

Since mid-May hydrous ethanol prices have risen in the Center-South Brazil, finding support from the rising gasoline price.

S&P Global Platts assessed hydrous ethanol basis the ex-mill Ribeirao Preto at Real 2,045/cu m on June 8, an increase of 16.19 % since May 19 when it was assessed at Real 1,760/cu m. The average E100 ethanol retail price for consumers rose 0.56% in the southeast and 5.2% in the center west over the same period, according to ANP data.

Platts last published the gasoline import parity price delivered in Santos at Real 1,480.09/cu m, June 5. Market participants estimate freight from Santos to Paulinia at Real 61.60/cu m, suggesting that the Petrobras price would still have room to increase before becoming more expensive than the comparable international gasoline replacement barrel.

Brazilian ethanol producers have been favoring keeping ethanol in tank and increasing inventories levels on the expectation that Petrobras will continue to increase gasoline prices which will at upwards pressure to hydrous ethanol prices.