The European T2 ethanol price closed Eur8.50 lower on the week at Eur530.50/cu m Thursday, hitting a six-month low, on expectations of increased supply.
Although several market participants say there is no noticeable difference in supply levels between the end of September and the first half of October, the ethanol volumes expected to come on the back of the new sugar crop have created bearish sentiment.
This has put pressure on prompt ethanol values even ahead of the beet-based supply actually reaching the market, just on the prospect.
The market has been largely on a downward trend since the peak of summer demand in July, as the market has been gearing towards more supply in October.
T2 prices found some support in September amid seasonal maintenance, but with October approaching and lower physical offers starting to make an appearance, nervousness has returned to the market.
This was further manifested in Thursday's paper moves, with the October swap losing Eur9 from Wednesday to Eur512/cu m, while the September swap lost Eur5 to Eur532/cu m.
Although front-month paper values showed some signs of rebounding Friday morning, sources expect to see some volatility over the coming month due to the outlook uncertainty.
Some additional ethanol volumes are bound to reach the market in the coming months but many think the hype is overdone and see the forward curve as undervalued.
"Sugar guys coming back might influence the market a bit but I don't see oversupply," a source said.
Sugar prices are not particularly attractive either, prompting producers to consider storing more sugar rather than offloading it at minimal margins.
