S&P Global Platts Friday assessed Chicago Argo ethanol 8.2 cents higher than Thursday's nearly two-year high, as low stocks and robust exports continued to support the market.
The last time Argo increased this quickly was November 25, 2014, when it rose 9 cents in a single day.
"We're running out of ethanol apparently," said one market participant. "There are just no sellers."
Argo, a benchmark for physical US ethanol, was $1.84/gal Friday, the product's highest level since December 15, 2014, when it was $1.93/gal. Platts assessed it at $1.7580/gal on Thursday.
The strength in Argo has pushed it to a narrow discount to the New York Harbor market.
"Argo is trading about at parity with New York Harbor," said another source. "It can't do that for very long."
Platts assessed front-month New York Harbor barges at $1.8575/gal Friday, 1.75 cents higher than Argo. That's the narrowest premium since September when it was 1.45 cents.
"I think Argo is thin," the second source added. "You get into this time of year and you've got guys who want to run down inventories for tax reasons."
Energy Information Administration data supported the idea that stocks are low.
The weekly EIA data showed domestic stocks added just 82,000 barrels in the week ended December 2. Market participants had expected a larger build.
As producers exited seasonal maintenance, sources expected production to rise and stocks to build. But ongoing demand from foreign buyers has kept stocks under control.
Monthly export data from the US Census Bureau released Monday showed that the US exported 131.6 million gallons of ethanol in October, the highest monthly total since December 2011.
Exports through November remained strong, with sources saying companies were shipping around 90,000 b/d. Market participants expect export demand to remain strong through the end of the year and into the first quarter of 2017. Production also avoided racing upward as quickly as some expected. Some traders were expecting run rates to race past 1.020 million b/d nearly a month ago. But it was only in the most recent week of data that output rose beyond that mark, climbing 11,000 b/d to 1.023 million b/d.
Part of production's slow return to high output could have to do with export-grade ethanol taking longer to produce, forcing plants to slow down production. But some plants may have experienced late turnarounds.
