California's ethanol market has returned to a more typical premium to the Chicago ethanol swap after it climbed sharply in July, market sources said.
"Vessels maybe being delayed I think played into run up, also issues on [Union Pacific] plants and term deals," said one source, referring to import cargoes from Brazil and plants on the Union Pacific rail line.
Now that imports from Brazil have stabilized and market participants are more confident in delivery dates, the California market has returned to more typical values.
Some plant issues that may have also contributed to tightness in California have also been resolved.
The beginning of August saw the premium drop sharply as product returned to the California market, but it has recovered in recent days.
S&P Global Platts assessed Northern California rail cars with a 95.02 carbon intensity (CI) at $1.5975/gal Tuesday.
California's Low Carbon Fuel Standard assigns CI scores to ethanol producers. The scores then affect the value of the molecule of ethanol being traded. Platts normalizes California trades, commonly 79.9 or sub-75 CI, to the 2017 gasoline standard of 95.02 for its assessments.
Platts assessed the front-month Chicago ethanol swap at $1.55/gal for a 4.75-cent premium for 95.02 CI California ethanol.
California's premium to the Chicago market is affected by the value of Low Carbon Fuel Standard credits, which S&P Global Platts assessed $3.50 higher at $91.50/mt Tuesday.
A higher credit value yields a higher per cent value for CI. For example, the cent/gallon CI value Tuesday between a 79.9 CI ethanol offer in the market and the Platts-assessed CI of 95.02 was 11.25 cents/gallon, up from 10.75 cents/gal on Monday.
