The New York Harbor ethanol market's premium to its Chicago counterpart has narrowed in recent days as high production and low demand increased inventories in the East Coast hub.
Front-month New York Harbor barges were heard at a 6.75-cent premium to the February Chicago ethanol swap Friday after trading at a 6-cent premium earlier this week. Just last week the barges were at an 8-cent premium to the same ethanol swap.
"Lack of demand means inventory is higher, which means New York Harbor unit trains are offered lower," said one source. "With 1.055 million b/d production in January, we have to send the barrels somewhere."
Ethanol production in January averaged nearly 1.055 million b/d, according to Energy Information Administration data.
Production reached an all-time high of 1.061 million b/d in the week ended January 27.
The high production caused stocks to build at Kinder Morgan's Argo, Illinois, the busiest hub of ethanol trade in the US. As storage space thinned at Argo, market participants looked toward other markets and sent more ethanol east to New York Harbor.
Stocks on the East Coast, the larger region that contains New York Harbor, added 1.334 million barrels in January.
Gasoline demand is currently hovering near its annual low, with the four-week average of finished gasoline supplied falling 39,000 b/d to 8.222 million b/d.
