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T2 ethanol moves to near seven-year high over Eurobob gasoline

London β€” Platts T2 ethanol assessment moved to a premium of $358.99/cu m over the Eurobob gasoline price Friday, up from $349.99/cu m Thursday, the highest level since February 19, 2009, as tightness of supply in Rotterdam continued to apply upward pressure on European ethanol prices.

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Continued shortness of supply on spot physical ethanol was serving to move prices higher, with the assessment increasing to Eur650.50/cu m ($697.79/cu m) from Eur648.75/cu m Thursday. The dollar price showed a slight fall on the day as the euro strengthened against the dollar to 1.0727 from 1.0757 Thursday.

Tight supply was the result of limited imports into the EU for much of the year and the continued closure of the Ensus bioethanol facility in northeast England.

This has meant a rolling backwardation has been prominent in the market since around March. Most recently, there have been question marks over one European producer's ability to serve the spot market, an explosion two months ago at a plant in the Czech Republic and a one-day strikes that affected French production.

Alongside this, the extremely low levels on the Rhine and Danube are making delivery into Rotterdam and, in fact, barging through the rest of Europe, very difficult.

One trader said he now required three barges to move 1,000 mt of ethanol.

The large premium over gasoline was not an unexpected situation for the ethanol market. The premium has been in triple figures every day since July 13 and has not been at a discount to Eurobob gasoline since November 12, 2014.

One trader at an industry event at the start of the month predicted discretionary blending would drop as a result of the relationship.

The gasoline market has also experienced a period of relative strength, with cracks having recently moved to multi-weeks highs, supported by demand for arbitrage barrels into the US Atlantic Coast and West Africa, while sentiment was boosted by maintenance work at the crude distillation unit of Shell's 404,000 b/d Pernis refinery.

Winter-grade gasoline, which the market adopts from October to March, typically has a higher Reid Vapor Pressure (around 90 kPa in Europe) and more ethanol and butane -- both with high RVP levels -- can be blended to meet octane specification requirements.

With demand for winter-grade rising, this might have affected blending economics of high RVP components such as ethanol.

Summer-grade gasoline, which the market adopts between April and September, has a low RVP, typically around 60 kPA.

EBOB barges were assessed at $448.75/mt Friday, down from $460.75/mt Thursday.

--Caroline Knight,
--Francesco Di Salvo,
--Edited by Jonathan Fox,