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US Data: EIA says ethanol production down, stocks increase

US ethanol production averaged 1.032 million b/d in the week ended December 29, down 58,000 b/d from the prior week, Energy Information Administration data showed Thursday.

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Compared with the same week last year, production was 11,000 b/d, or 1.05%, higher. Production was lower than market expectations, and the lowest production in 11 weeks since the week ended October 13 when it was 1.019 million b/d.

Data was delayed by one day due to the New Year's Day holiday on Monday.

Despite the fall in production total stockpiles rose, reversing the recent three week trend. Inventories increased 588,000 barrels to 22.619 million barrels. The increase was on the high end of market expectations. Total inventories were 3.941 million barrels above last year's level.



The Midwest saw the largest stock level increase gaining 616,000 to 8.361 million barrels, 1.541 million barrels higher than the same week last year. The Midwest hosts most of the ethanol plants in the US and Kinder Morgan's Argo, Illinois, terminal, the busiest hub of ethanol trade. High stocks in the region have weighed on prices the past several weeks, coupled with slower gasoline demand.

The East Coast saw a 99,000 barrel increase to 7.013 million barrels and the Gulf Coast shed 66,000 barrels to 4.329 million barrels.

The West Coast shed 64,000 barrels as the EIA reported no weekly ethanol imports for the fourth consecutive week.

A fall in blending demand looks to be the reason behind the rise in stocks despite the decrease in production.

The four-week rolling average of the refiner and blender net ethanol input dropped 8,000 b/d to 907,000 b/d while the weekly average fell a significant 91,000 b/d or 9.62% to 9855,000 b/d.

The four-week rolling average of gasoline demand, represented by product supplied, dropped 61,000 b/d to 9.224 million b/d, while the weekly average fell 835,000 b/d to 8.65 million b/d.

The four-week rolling average of the ethanol blending rate -- calculated by dividing the four-week rolling averages of the net ethanol input and gasoline demand -- slid to 9.90% from 9.92%, 0.1 percentage point below the blend wall.

The blend wall is the notional 10% limit on ethanol blending driven by infrastructure and policy constraints.

--Sophie Byron, sophie.byron@spglobal.com

--Edited by Richard Rubin, richard.rubin@spglobal.com