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US ethanol inventories could build even with exports: sources

Houston — Rising production rates could create oversupply in the US ethanol market, even as export interest reignites, sources said Tuesday.

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"If we're going to produce 1.060 million-1.080 million b/d, even if you use a big number like 120,000 b/d of exports and 920,000 b/d in blender inputs we would still build," said one source.

Output has climbed 89,000 b/d in the previous three weeks of US Energy Information Administration data. And sources think there's still room for rates to climb as some plants may have finish late turnarounds in last week's data.

With production so high there is not enough demand to consume all the product reaching the market.



Stocks in the week ended October 27 were 1.735 million barrels higher than the same week last year, with most of that increase focused in the Midwest.

Domestic demand normally falls in the fourth quarter of the year as driving slows.

The four-week average of the refiner and blender net ethanol input was 929,000 b/d in the week ended October 27. That input averaged 910,000 b/d in Q4 2016.

Exports have returned to the center stage in recent days as rumors of possible cargoes to China have circulated the market.

Confirmation has been lacking, but guesses as to the number of cargoes have ranged from around five spread over November and December to 13 between the two months.

With so little firm information available about the cargoes prices have climbed on just the possible reopening of the trade flow to China.

It would be the first time in 2017 that the US has been able to export ethanol to China after the country levied a 30% import tariff at the beginning of the year.

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

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