The price of spot Argo ethanol rebounded slightly Thursday after shedding 19 cents on Tuesday and Wednesday.
The benchmark for physical US ethanol was talked in a $1.64-$1.68/gal range Thursday morning after S&P Global Platts assessed it at $1.6225/gal on Wednesday. It was assessed at $1.8125/gal Monday.
Argo has tumbled this week as support for the market evaporated. Weekly US Energy Information Administration data over the past two reporting periods has shown production climbing, threatening a rise in stock levels.
"The strong upward trajectory in the past few days was unsustainable and it was only a matter of time before the bubble burst," said one source.
"Things were balanced, maybe a little tight, but the way the prices were increasing every day was crazy," the source added.
Argo peaked at a three-year high of $1.9825/gal on December 13 before reversing course.
Production in the week that ended December 16 was 1.036 million b/d, down just 4,000 b/d from an all-time high of 1.040 million b/d a week earlier, according to EIA data.
That level of production has market participants expecting stock builds in the coming weeks.
Robust export demand over the past several months has kept inventories under control, but record output rates are likely to prove too much for consumption to handle, sources say.
Sources said stocks are likely to start building in the early months of 2017. Domestic inventories shed 16,000 barrels in the most recent week, ending the week 1.327 million barrels lower than in the same week a year ago.
