Ethanol Report

February 9, 2007

BY Spencer Kelly, OPIS

Jan. 10—Ethanol spot prices had quite a run in the last four weeks or so of 2006. Thin prompt supply helped keep ethanol firm, even when gasoline values wavered and blending costs caused many discretionary users to fall by the wayside.

Chicago prompt bulk ethanol prices that entered December in the mid-to upper-$2.20s per gallon moved steadily higher through the month, with offers over $2.50 per gallon at times and deals heard into the middle $2.40s per gallon. At racks, splash blenders found Iowa racks ending the year averaging around $2.54 per gallon—up more than 30 cents for the month.

However, buying gradually withered as the ethanol premium versus gasoline made blending for pure economics a money loser. With Chicago spot gasoline ending the year around $1.57 per gallon, spot ethanol cost at least 32 cents more than gasoline, even after factoring the federal blending credit. In New York, some prompt ethanol barge deals that hit $2.60 per gallon ran more than a dollar over NYMEX front-month RBOB futures.

In the first week of 2007, relentless selling in gasoline markets had many physical gasoline values hitting 18-month lows, which took a toll on ethanol. At last word, Chicago ethanol sellers sought buyers for January bulk deals under $2.20 per gallon, representing a 10 percent decline over the first 10 days of 2007. New York deals around $2.35 per gallon for latter January lost 15 cents or more since December, but even then remained "out-of-market" for those buyers seeking at least parity blending value with gasoline.

For more information, contact OPIS Fuel Ethanol Report at (888) 301-2645, ext. 2478.

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