Ethanol futures drop over 10 percent, breaking steep 2014 rise
On April 2, U.S. ethanol futures dropped by 11.6%, breaking a three-month upward trend due to a rise in stocks and production, and the resumption of imports for the first time in six months. The EIA reported an increase in ethanol stocks to 15.9 million barrels and a 4% rise in production to 922,000 barrels per day. Futures for April fell by 9% to $3.20 per gallon, with May contracts also down by 10.4% to $2.499 per gallon.
NEW YORK, April 2 (Reuters) – U.S. ethanol futures plummeted by as much as 11.6 percent on Wednesday, breaking a three-month trend of steep growth, after government data showed stocks and production rose last week and imports of the fuel resumed for the first time in half a year.
Ethanol futures had risen over 60 percent since the start of the year, mainly on logistical problems in transporting it to Gulf Coast refineries and the East Coast pricing hub as well as seasonally low stocks. But for some, the increases were overblown.
EIA data issued on Wednesday showed stocks of ethanol had increased by 222,000 barrels to 15.9 million barrels in the week ending March 28. Imports amounted to just 11,000 barrels per day (bpd) and were the first since the week ending Oct. 4.
Production, meanwhile, rose 4 percent last week to 922,000 bpd, the highest reading since late December.
One trader said the imports, which he said came from a Brazilian vessel supplying ethanol into Florida, came as a surprise.
“I think it came in sooner than people expected. I think that is sort of spooking people, because it means more could be on the way, and (Brazilian) harvest season hasn’t even started,” the trader said.
One broker agreed the market had a long-overdue correction coming. While pronouncing the rise in ethanol stockpiles reported by the EIA as “awfully small,” the Texas-based broker said, “I think that market just needed a little something to push it over the mountain it had climbed.”
The futures contract closed 9 percent lower at $3.20 per gallon. Traders noted the current front-month contract, which is April, is due to expire on Thursday, prompting a sell-off of that month’s paper. However, the May contract also dropped, closing 10.4 percent lower at $2.499 per gallon.
Ethanol, mostly produced from corn, is used to blend with traditional fuels such as gasoline to dilute pollutants.
Source Link : https://www.reuters.com/article/business/energy/ethanol-futures-drop-over-10-percent-breaking-steep-2014-rise-idUSL1N0MU295/
