Ethanol Prices Fell To A 5 Month Low This Week

It’s a quiet start for energy markets Tuesday with refined products trading lower by a penny or less, while crude prices hover near break even after some modest bidding overnight.

WTI managed to settle above the $70 mark for the first time in 2 weeks Monday, which sets up a good short term pivot point for prices. If the bulls can continue to push higher from here that brief dip into the $60s will look like a bear trap, but if they fail to do so, we may see the recent gains as nothing more than a dead-cat bounce in the midst of a larger move lower.

Tomorrow’s FOMC meeting is getting more attention than normal as the first rate cut since the inflation war began 2.5 years ago is expected. The CME’s Fedwatch tool shows that currently 67% odds of a 50 point rate cut are being priced into Fed Fund Futures this morning, up from 34% odds last week. That high level of uncertainty in the outcome means we may well see increased volatility after the announcement tomorrow afternoon, even though energy and equity markets have gone their own way more often than not recently.

San Francisco CARBOB basis began its return trip to reality Monday, with prompt values dropping more than 40 cents on the day after signals that Valero’s Benecia refinery was beginning to operate closer to planned rates after an upset in late August that pushed premiums to more than $1/gallon vs futures and most other regional markets. SF diesel prices have not yet made their turn, continuing to tick higher Monday to a 46 cent premium to futures, and a 45 cent premium to diesel prices in Los Angeles. LA markets have shrugged off numerous flaring notices over the past week and will get another chance today as PBF reported a 6th upset in the past 9 days at its Torrance refinery overnight.

Ethanol prices fell to a 5 month low this week as the negative sentiment on demand seems to be creeping in to biofuels, even though corn prices have bounced modestly after reaching 4 year lows in August. There’s also a supply angle to the ethanol sell-off as Brazil is likely to be forced to use more of its sugar cane for ethanol rather than food this year due to arson damaging crops, and India who is encouraging increased ethanol production to meet its carbon emissions targets that many call ambitious and others call simply misplaced given ethanol’s suspect life cycle impact on the land, air and water.

Another one bites the dust: Fulcrum bioenergy filed for bankruptcy last week after its plans to make heavily subsidized ethanol and then SAF both fell flat. Reports detail the complex nature of the attempt to turn waste into fuel, and the hundreds of millions lost that the company had received from several airlines, along with a teacher’s retirement fund. Marathon Petroleum and Waste Management were both listed as creditors in the filing.

It’s not just renewable production facilities struggling these days. Chinese courts declared two Sinochem refineries bankrupt today after margins plummeted this year. Those facilities had a combined capacity of 220mb/day.

Marathon reported an upset in a diesel desulfurizing unit at its Galveston Bay refinery Monday but just like most of the 24 other times the company filed an upset report at this facility over the past year, no one in the spot market seemed to care as run rates don’t appear to have been materially impacted. The filing does snap a 6 week streak of not having any filings with the TCEQ at the facility that’s has been one of the most challenged in the country nearly 20 years after the explosion that killed 15 people.

A vehicle crashed into an natural gas pipeline owned by Sunoco-Parent Energy Transfer in Deer Park TX Monday, sparking a huge explosion and fire that forced nearly 1,000 homes to be evacuated. There are no reports of any direct or indirect impacts on the nearby Deer Park refinery that Pemex bought from Shell which is a few miles west of the incident.