The benchmark Argo market Thursday backed away from its 15-week high as bearish US Energy Information Administration data weighed on prices.
"We're down a penny this morning," said one source. "I believe from yesterday's EIA report."
S&P Global Platts assessed Argo at $1.5870/gal on Wednesday, near its highest level since April 25, when it was $1.6080/gal.
The weekly EIA data showed production and stocks both higher in the week ended August 4. The rise in output, up 10,000 b/d to 1.012 million b/d, was in line with market expectations.
But the climb in stocks, which added 495,000 barrels to finish the week with 21.347 million barrels, was beyond what the market was expecting. the Gulf Coast led the build. Market participants have seen a decline in exports, which mostly flow out of the Gulf Coast. With less export demand, stocks in the Gulf Coast are sensitive to builds.
Argo had found support over the past several weeks from declines in stock levels and lower production. Despite record production levels early this year, the past three weeks have seen output below 2016 levels.
Feedstock prices also bolstered prices. Corn prices have been strong thanks to weather concerns in the Corn Belt. Many market participants have been bullish on corn, with some predicting $4/bushel in the coming weeks.
"Corn is relatively still cheap," said another source about buying interest in the ethanol market.
The US Department of Agriculture will release its World Agriculture Supply and Demand Estimate Thursday and traders expect a mixed bag of data.
On the one hand, production and yields for the current crop are expected to be lower, supporting prices. But on the other hand, carryover from the previous crop are expected to be higher, weighing on prices.
