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US EIA says ethanol output dips to 1.072 million b/d while stocks build on week

US DATA: EIA says ethanol output climbs while stocks fall on week

Houston — US ethanol production averaged 1.074 million b/d in the week that ended July 20, up 10,000 b/d week on week, Energy Information Administration data showed Wednesday.

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Output in the most recent reporting week rose 62,000 b/d, or 6.13%, from the year-ago week. Production was on the high end of market expectations and at its highest level since late December 2017.

Stronger margins compared to earlier in the year may have encouraged a return to higher output.

Stocks, meanwhile, continued their decline as demand increased and the Gulf Coast continued to shed product faster than other regions could build. Total inventories fell by 115,000 barrels to 21.653 million barrels, the EIA said. Inventories were 124,000 barrels above the same week last year.

The Gulf Coast led the decline as it was 370,000 barrels lower to finish with 4.281 million barrels. Some steady export interest could be drawing down inventories in the region, while shipments to other regions within the US may also be pulling stocks lower but are not counted in the EIA's survey until they are unloaded.

Most other regions added product, with the Midwest seeing the largest increase. The region added 136,000 barrels to finish the week with 7.399 million barrels. The Midwest is host to the largest number of ethanol plants across all US regions, so the higher production likely put more product in storage at plants.

Inventory on the West Coast rose by 96,000 barrels to 2.544 million barrels despite another week with no reported imports. The EIA has not reported any ethanol imports since the week that 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.

Sources have said that some imports may arrive in late August or early September as the recent weakness in the Brazilian real may have opened the arbitrage enough to finalize cargoes.

The East Coast increased by 28,000 barrels. Premiums in New York Harbor, one of the largest trading hubs on the East Coast, have backed away from their multi-year highs as product moved into the region. Insufficient rail supply to New York Harbor has kept prices high in that hub in recent weeks. As trading interest for July has waned, sellers have opted to keep product to sell in August.

The four-week rolling average of the refiner and blender net ethanol input fell 1,000 b/d to 934,000 b/d, while the weekly average rebounded 29,000 b/d to 942,000 b/d.

The four-week rolling average of gasoline demand, represented by product supplied, rose 29,000 b/d to 9.675 million b/d, while the weekly average climbed 138,000 b/d to 9.846 million b/d.

The four-week rolling average of the ethanol blending rate, calculated by dividing the refiner and blender ethanol input by gasoline demand, fell to 9.65% from 9.69% the previous week.

--Josh Pedrick, joshua.pedrick@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com