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EIA says US ethanol output climbs, stocks drop on week

Houston — US ethanol production averaged 1.059 million b/d in the week that ended October 26, up 35,000 b/d week on week, Energy Information Administration data showed Wednesday.

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Output in the most recent reporting week rose 3,000 b/d, or 0.28%, from the year-ago week. Production was on the high end of market expectations.

Production had been sluggish in returning from seasonal maintenance, as low corn prices had kept margins just wide enough for plants to continue running. But continued weakness in production margins may have forced some plants to cut output.

Issues with rail logistics have delayed some loadings at plants in recent weeks, which one source said could appear in the EIA's survey as a plant not producing.

Total stocks shed 1.151 million barrels as every region saw lower inventories. It was the largest single-week decline on record. Inventories were 1.272 million barrels above the same week last year. The weekly stock decrease was larger than market expectations.

US ETHANOL STOCKS OCTOBER 26 (barrels)
Region Total Change %Change Change/year
East Coast 7,544,000 -320,000 -4.07 447,000
Midwest 7,356,000 -407,000 -5.24 -458,000
Gulf Coast 4,653,000 -286,000 -5.79 1,203,000
Rocky Mountain 372,000 -9,000 -2.36 6,000
West Coast 2,821,000 -128,000 -4.34 72,000
Total 22,746,000 -1,151,000 -4.82 1,272,000

Midwest inventories were 407,000 barrels lower on the week for the largest fall. The Midwest is host to the largest number of ethanol plants across all US regions. Open arbitrages to nearly every other region encouraged market participants to move product out of the Midwest.

The East Coast fell by 320,000 barrels. Some rail delays feeding into New York Harbor may have drawn down stocks in the East Coast. Premiums in the East Coast hub have remained relatively high, with S&P Global Platts assessing November barges trading at an 11.25-cent premium to the November Chicago ethanol swap on Tuesday.

The Gulf Coast shed 286,000 barrels. The Gulf Coast is the most common origin for ethanol exports from the US and low prices in recent weeks may have prompted increased buying interest from abroad.

The West Coast shed 128,000 barrels as the EIA reported no imports on the week. 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.

Several vessels landing in California in recent weeks have pushed inventories higher in the region and market participants in the state continue to balance demand with supply.

The four-week rolling average of the refiner and blender net ethanol input rose 5,000 b/d to 931,000 b/d, while the weekly average fell 4,000 b/d to 936,000 b/d.

The four-week rolling average of gasoline demand, represented by product supplied, climbed 40,000 b/d to 9.212 million b/d, while the weekly average fell 62,000 b/d to 9.262 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, rose to 10.11% from 10.10%. The blending rate was at its highest level since February 2017.

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

-- Edited by Derek Sands, newsdesk@spglobal.com