US ethanol inventories on the rise have market participants worried about a capacity crunch at Kinder Morgan's Argo, Illinois, terminal, sources said Thursday.
"Lots of people were sending things to Argo," said one source. "Argo just got bombarded with rail cars."
Sources differed on how full Argo, a key hub for physical ethanol trade in the US, is, but said it is in a range of 67%-80%.
The most recent weekly US Energy Information Administration data showed stocks added 1.331 million barrels to finish with 20.009 million barrels in the week ended January 6. The previous week saw stocks nearly flat, with just a 5,000-barrel decline.
But sources said that relative stability was due to ethanol in transit, while unit trains were delayed making deliveries. The product on trains was not counted in the EIA's survey, according to sources.
Argo filled to its storage capacity in March 2016, prompting Kinder Morgan to redirect delivery trucks to nearby terminal. That sent prices tumbling to more than 10-year lows.
Kinder Morgan declined to comment.
Mid-December saw Argo reaching a two-year high as strong export demand encouraged market participants to dip into storage. That drew more product to the Argo terminal. S&P Global Platts assessed Argo at a peak of $1.9825/gal on December 13, 2016.
But production has climbed to an all-time high since then, averaging 1.049 million b/d in the week ended January 6, according to EIA data.
The record volume of ethanol entering the market coincided with the annual low for gasoline demand. The four-week average of gasoline demand fell 101,000 b/d to 8.871 million b/d in the same week.
Combined with export demand beginning to wane, stocks are finding themselves climbing.
