Kinder Morgan's Argo, Illinois, terminal has begun accepting limited ethanol deliveries, sources said Tuesday. The company began redirecting trucks March 2 as the terminal reached its ethanol storage capacity.
"Kinder Morgan lifted the quasi-embargo on ethanol truck deliveries, so inventories must have come down a bit," a source said Tuesday morning.
Kinder Morgan did not immediately respond to a request for comment.
"The Argo market is on fire today," one source said about the rising price for Argo ethanol. Prices at the terminal jumped higher in morning trading Tuesday, with prompt product heard trading at $1.3950/gal after being indicated at $1.3825/gal Monday. The Platts Argo assessment for delivery 5-15 days forward was $1.3930/gal Monday.
Delivery trucks are currently limited to a single unloading dock rather than the four or five that are normally available. A source said that companies can only take deliveries "assuming you have the space."
Kinder Morgan notified customers in an email on March 23 that deliveries to the terminal could resume on March 24.
Domestic ethanol stocks have hovered near all-time highs for most of 2016. The glut was worsened by a steep contango in the ethanol market, prompting companies to hold ethanol in storage until prices improved. The dual problem resulted in the Argo terminal, the busiest hub of physical ethanol trading in the US, to reach its storage capacity.
The logistical challenge of a full terminal has put pressure on Argo prices for most of March. Argo has traded more than 5 cents/gal under the front-month Chicago ethanol swap for most of this month. It has only narrowed in recent days, 3.2 cents/gal on Monday, as the front-month has drawn closer to the Platts Argo assessment window of 5-15 days forward.
But renewed activity in the hub should push physical prices up in the coming days, sources said Monday. Falling inventories "would give less reason for as steep of structure," a source said about the relief an open Argo terminal could bring the market.
Sources said that the terminal is not in the clear just yet. Ethanol stocks are still high and the market is still in a steep contango, though falling inventories "would give less reason for as steep of structure," a source said. Deliveries to the terminal will remain limited until the market works through more of the ethanol stocks in storage.
