S&P Global Platts assessed Chicago Argo ethanol at $1.6195/gal Tuesday, as a lack of readily available product in the prompt market drove prices 8.4 cents/gal higher over the past five trading days and 2.45 cents/gal higher on the day.
"These next couple of weeks we should see exports loading out while the physical market is still pretty tight," said one source.
Sources have said that export demand through the end of September is robust, with vessels that were booked weeks or months ago finally loading and departing.
That is prompting plants to produce more export-grade product, forcing market participants to dip into storage to meet current domestic demand.
Much of that storage is at Kinder Morgan's Argo, Illinois, terminal; the basis for Platts' assessment.
The uptick in export vessel loading coincides with seasonal maintenance for producers. Production averaged 981,000 b/d in the week ended September 16, the most recent Energy Information Administration data showed. That run rate output was the lowest since mid-June.
The lower production has contributed to the tightness trades are feeling in the market.
The margin environment has hovered near 21-month highs for the past several weeks. It reached a fresh high of 43.47 cents/gal Tuesday.
With crush margins so profitable, producers are likely to exit turnarounds at high rates once again. Sources have said output consistently above 1 million b/d is likely.
Spreads to the latter months of 2016 have widened as market participants are unsure of demand. Platts assessed Argo 7.2 cents/gal above the front-month Chicago ethanol swap, which is currently October.
The source said the October through December have seen little interest. "Spreads continue to widen from the front going out," he said. "Nobody's chasing the back months."
If production returns with a vengeance and demand can't be found, domestic stocks could become oversupplied.
