The Chicago paper ethanol market Monday hovered at a premium over physical counterpart Argo, as the market moves into seasonal contango thanks to an annual low in demand and high production.
A benchmark for physical US ethanol, Argo was indicated at $1.5250/gal Monday while the January Chicago ethanol swap traded for $1.53/gal.
S&P Global Platts assessed Argo at $1.54/gal Friday while the front-month swap, currently February, was assessed at $1.5450/gal.
The last time the paper market was over the physical was August 17, 2016 when it held a 45-point premium.
US ethanol is moving into a contango as the front of the price curve has become the weakest point.
Market participants have turned their attention to inventory levels that are likely to build in the coming weeks as production has climbed to record levels.
US ethanol producers made an all-time high 1.043 million b/d in the week ended December 30, according to Energy Information Administration data.
Ethanol exports have been at their highest level since 2011 the past few months, with sellers sending 121.9 million gallons abroad in November, according to US Census Bureau data.
But exports are expected to wane in the coming months, sources have said. And with domestic gasoline demand near its annual low, inventories are likely to build.
Stocks shed 5,000 barrels in the week ended December 30 to end the week with 18.678 million barrels, according to EIA data. That number was 2.421 million barrels lower than the same week last year.
So though stocks are likely to increase, the market has some breathing room thanks to the robust demand of the past few months.
