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The biofuels editorial staff at CRB Barchart issues a free weekly newsletter on the ethanol market containing market analysis, news and charts. This report, which is sponsored by the CME Group, is helpful for those trading the ethanol, RBOB gasoline, and feedstock markets as well as the stocks... More
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  • Why are the oil majors MIA in ethanol? CRB/CME Group Weekly Ethanol Report

    The ethanol market this week will focus on:
    - the corn market where the focus remains on weather, yields, and exports,
    - gasoline prices, which recovered last week on short-covering and Friday’s stock rally, and
    - whether ethanol can continue to find such strong support based on rising corn prices.

    Why are major oil companies MIA in biofuels?

    Biofuels Digest last week ran an interesting article entitled “Why don’t oil majors invest in biofuels in scale? (see link on page 2 news digest item).  The simple answer, according to Biofuels Digest, is that the upstream oil exploration and production (E&P) business is so massively profitable that the oil majors have no interest in investing their capital in the lower margin biofuels business.  The corn ethanol business is a dangerous game that is completely dependent on the ethanol-corn price spread, while cellulosic and algae-based ethanol can be as much of a chemical refining business as it is a biofuels business, meaning it falls outside the oil majors’ wheelhouse to some extent.  Biofuels Digest argues that the oil majors will only show up to invest at scale in biofuels if oil prices plunge to $30 per barrel and wreck their E&P returns, forcing them to look elsewhere for profits.
     
    Ethanol Market Action -  September CBOT Ethanol futures prices last week extended the 9-week rally to a total of 34%, posting a new 2-year high and closing up 6.8 cents (+3.7%) at $1.926 per gallon.  Bullish factors included the 1.2% rally in gasoline prices, the upward rebound in corn prices from early-week lows, and last Friday’s sharp stock market recovery, which suggested a little better view of the economy and fuel demand.

    Ethanol prices were also boosted by last Wednesday’s weekly EIA report showing a 2.9% decline in weekly ethanol production to a 4-week low of 835,000 barrels/day, the third weekly decline. In addition, inventories fell sharply by 7.0% to a 7-month low of 17.858 million barrels, which suggested that strong ethanol demand continues.  Ethanol inventories are now down by 10.4% from the record high of 19.921 million barrels posted in the week ended July 2.

    Ethanol/Gasoline – September gasoline futures prices last Wednesday posted a new 13-month low but then rebounded higher to close the week up 2.28 cents (+1.2%) at $1.9479 per gallon.  Gasoline inventories rose to a new 5-month high, but gasoline prices rallied mainly on short-covering after the sharp decline and on last Friday’s stock market recovery.  The spread of Sep ethanol prices minus gasoline prices last week rose by another 4.5 cents to a meager -2.2 cents, the narrowest spread since Dec 2009, although ethanol is still 47 cents cheaper than gasoline including the 45-cent ethanol tax subsidy.

    Ethanol/Corn – Sep corn futures prices last week overcame an early-week sell-off to close 0.25 cents lower (-0.1%) at $4.21 per bushel, just slightly below the recent 7½-month high of $4.2525. Bullish factors continued to center on strong demand for U.S. corn exports with China buying 193,896 metric tons of U.S. corn in July, double the June level.  Corn was undercut by last Monday’s news that the good-to-excellent rating for the U.S. corn crop rose by 1 point to 70%.  Strength in ethanol prices allowed the Sep ethanol-corn crush margin to rise by another 6.9 cents to a 6-month high of 42.2 cents/gallon.  Including DDG, the Sep corn for ethanol crush margin rose by 6.9 cents to 76.1 cents/gallon.

    Ethanol Calendar
    - Aug 30: EIA June Monthly Ethanol Report
    - Sep 1: EIA Weekly Petroleum Status Report
    - Sep 10: USDA WASDE Crop Supply-Demand
    - September: EPA’s E15 decision due

    Read the full PDF report with ethanol news digest and graphics at http://cmegroup.barchart.com/ethanol/

    To subscribe to this free weekly report, please go to http://www.cmegroup.com/newsletter/web2lead/web2sf-old.html

    Please see full PDF report for disclaimer and copyright information.



    Disclosure: No positions.
    Aug 30 10:50 AM | Link | Comment!
  • Ethanol prices depressed by weekly rise in production and inventories; CRB/CME Weekly Ethanol Outlook

    The ethanol market this week will focus on:
    - the corn market ahead of Monday’s USDA weekly Crop Progress report and Wednesday’s USDA Acreage and Grain Stocks reports,
    - gasoline prices, which are focused on any disruptions caused by Tropical Storm Alex, and
    - Tuesday’s EIA monthly ethanol report and Wednesday’s EIA Weekly Petroleum Status Report.

    Weekly ethanol data - The EIA reported last Wednesday that U.S. ethanol inventories in the week ended June 18 rose fairly sharply by 4.4% to 19.368 million barrels (813 million gallons) from the previous week’s figure of 18.551 million barrels (779 million gallons).  Meanwhile, ethanol production in the week ended June 18 rose by +0.8% w/w to 846 million barrels/day,  which was just slightly below the record level of 847 million bpd seen in March.  The rise in production and inventories in the latest week helped push ethanol prices lower last week as the market struggles to absorb continued near-record levels of production.  Now that the markets have weekly ethanol data, this Tuesday’s monthly ethanol report for April will be relatively stale.  In March, U.S. ethanol production hit a record high of 1.103 billion gallons, which was up 32.4% y/y. 

    July CBOT Ethanol futures prices last week fell sharply to post a new 11-month low and close 8.8 cents lower (-5.4%) at $1.536 per gallon.  The main bearish factor was record U.S. ethanol production combined with the difficulty of expanding demand with the EPA’s recent announcement that it is delaying its E15 decision for newer vehicles until September.  Gasoline prices rallied sharply last Friday but that didn’t help ethanol prices since the gasoline rally was due to an approaching storm in the Gulf of Mexico that will not affect the land-based ethanol market.  Ethanol prices last week were also undercut by (1) the sharp 5.6% sell-off in corn prices, and (2) the 33% plunge in new home sales, which raised further doubts about the US economy and consumer fuel demand.

    Ethanol/Gasoline – July gasoline futures prices faded last week but then rallied sharply on Friday on concern about tropical storm Alex, finally closing the week up 2.02 cents (+0.9%) at $2.1678 per gallon.  Except for the concern about the storm, sentiment in the gasoline market was generally bearish with weak U.S. economic data and with gasoline inventories still 3.9% above the 5-year seasonal average.  With the weakness in ethanol prices versus the strength in gasoline prices, the spread of July ethanol prices minus gasoline prices last week fell sharply by 10.8 cents to -63.2 cents per gallon, which was mildly above the recent 1-3/4 year low of -77.0 cents.

    Ethanol/Corn – July corn futures prices last week fell sharply back toward the recent 9-month low and closed the week down 20.25 cents (-5.6%) at $3.4050 per bushel.  The corn market sank last week on forecasts for cooler and drier weather and the likelihood that U.S. farmers this summer will produce a record-sized crop.  The U.S. corn crop remains in 75% good-to-excellent condition, above last year’s 70% and the highest level in at least 5 years.  The July ethanol-corn crush margin last week fell by 1.6 cents to 32.0 cents per gallon, mildly above the recent 1-year low of 25.1 cents.  Including DDG, the corn for ethanol crush margin fell by 1.6 cents to 61.2 cents per gallon.

    Ethanol Calendar
    - June 29: EIA Monthly Ethanol Report
    - June 30: EIA Weekly Petroleum Status Report
    - June 30: USDA Acreage, USDA Grain Stocks
    - July 19: USDA WASDE Crop Supply-Demand
    - September: EPA’s E15 decision due

    Read the full PDF report, which is attached, or click the following link: http://cmegroup.barchart.com/ethanol/

    Please see full PDF report for disclaimer and copyright information.

    To subscribe to this free weekly report, please go to http://www.cmegroup.com/newsletter/web2lead/web2sf-old.html

     



    Disclosure: No positions.
    Jun 28 10:18 AM | Link | Comment!
  • Ethanol prices rally despite EPA's E15 decision delay; CRB/CME Group Weekly Ethanol Report

    The ethanol market this week will focus on:
    - the corn market ahead of Monday’s USDA weekly Crop Progress report,
    - gasoline prices, which continued higher last week as sentiment improved on the economy and fuel demand,

    and
    - Wednesday’s EIA Weekly Petroleum Status Report, which now contains ethanol data on a weekly basis.

    EPA announces delay in E15 decision and could be moving to tiered ceiling--The EPA last week announced

    that it is delaying its decision on whether to allow ethanol blends up to 15% (E15) from the current 10%

    until September in order to allow more time for testing on vehicles of 2007 and newer.  The EPA appears

    willing to approve E15 for model years 2007 and newer.  However, the EPA said it will not decide on

    engines older than 2007 until later in the year.  This poses a serious problem because gasoline stations

    are not equipped to sell multiple blends of ethanol/gasoline, allowing vehicle owners to choose between

    various blends depending on their model year.  The ethanol industry wants a single limit for all

    engines, thus avoiding the multiple blend problem.  The ethanol market was able to shake off the

    negative EPA news, which eliminated hopes that the EPA might adopt an across-the-board E12 limit as soon

    as this month.

    Weekly ethanol data - The EIA reported last Wednesday that U.S. ethanol inventories in the week ended

    June 11 were 18.551 million barrels (779 million gallons).  That was up 1.3% w/w, but was down 5.8% from

    March, indicating that inventories are not burdensome. Ethanol production was unchanged w/w at 839

    million bpd, down slightly by 0.9% from March’s record level of 847 million bpd.

    Ethanol prices extend upward rebound--July CBOT Ethanol futures prices last week extended the upward

    rebound from the recent 9-month low to post a new 5-week high and close 3.8 cents higher (+2.4%) at

    $1.624 per gallon.  Bullish factors included (1) increased optimism about the US economy and fuel demand

    with the rally in the stock market, (2) the 4.8% rally in gasoline prices and 3.2% rally in corn prices,

    and (3) the 2.2% sell-off in the dollar index. 

    Ethanol/Gasoline – July gasoline futures prices last Tuesday posted a new 5-week high but then faded

    later in the week to close up 9.79 cents (+4.8%) at $2.1476 per gallon. Bullish factors included (1) the

    rally in the stock market, which boosted optimism about the economy and fuel demand, and (2) Wednesday’s

    news that U.S. gasoline demand in the week ended June 11 climbed to a 9-1/2 month high.  The spread of

    July ethanol prices minus gasoline prices last week fell by 6.0 cents to -52.4 cents per gallon, which

    was well above the recent 1-3/4 year low of -77.0 cents.

    Ethanol/Corn – July corn futures prices last week extended the 2-week rally rebound to post a new 3-week

    high and close 11.25 cents higher (+3.2%) at $3.6075 per bushel.  Bullish factors last week included

    technical short-covering and increased optimism about demand after the US Grains Council forecasted that

    China may purchase in excess of 1 million metric tons of U.S. corn in the next 18 months.  The July

    ethanol-corn crush margin last week fell by 0.2 cents to 33.6 cents per gallon, mildly above the recent

    1-year low of 25.1 cents.  Including DDG, the corn for ethanol crush margin fell by 0.2 cents to 62.7

    cents per gallon.

    Ethanol Calendar
    - June 23: EIA Weekly Petroleum Status Report
    - June 29: EIA Monthly Ethanol Report
    - July 19: USDA WASDE Crop Supply-Demand
    - September: EPA’s E15 decision due

    Read the full PDF report, which is attached, or click the following link: http://cmegroup.barchart.com/ethanol/

    Please see full PDF report for disclaimer and copyright information.

    To subscribe to this free weekly report, please go to http://www.cmegroup.com/newsletter/web2lead/web2sf-old.html

     



    Disclosure: No Positions
    Jun 21 9:06 AM | Link | Comment!
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