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EU market participants see more positive environment for ethanol blending

European ethanol sources are starting to see a more positive environment for ethanol blenders as the T2 ethanol price continues to fall while Eurobob gasoline rises.

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By Wednesday evening, the Platts T2 ethanol assessment dropped Eur4.50/cu m to Eur440.50/cu m ($499.22/cu m), the lowest since February 17, 2015, reducing the biofuel's premium over Eurobob gasoline to $149.09/cu m from $154.29/cu m the previous day -- the lowest since July 23, 2015.

As ethanol's premium has narrowed in recent months, one trader said blending had increased. "People who could stop blending ethanol did so. March price action on ethanol has made ethanol more interesting again," the trader said.

At the start of the year, any blenders able to do so had reduced blending rates due to high ethanol prices against the falling energy complex.

On January 15, ethanol's premium over Eurobob was $379.04/cu m.

The switch away from ethanol is now expected to reverse, according to a source.

A second source said ethanol prices had further to fall. "Eur445/cu m looks expensive, so maybe it needs to go to Eur425/cu m," the source said.

Despite arbitrage being closed and plants temporarily shutting for maintenance, high stocks in Europe would prevent any immediate price increase.

"The market will go through a rebalancing phase but we have to eat through inventories first," the source added.

--Caroline Knight,
--Edited by Jeremy Lovell,