Gradual Ethanol Production Takes Down the U.S. Market Prices Amid the Storm Elliott
- 27-Dec-2022 6:16 PM
- Journalist: Yage Kwon
Texas- Ethanol production in the U.S. market slipped as the inventories faced less demand for the product. According to the data published by the Energy Information Administration (EIA), the Ethanol production rate in the country dipped by 3%, proportionally compressing the stocks in the U.S. market. During the fourth quarter of 2022, factors such as inflation, fluctuating natural gas prices, and sliding employment rate combined with declining demand for the product periodically in the country contributed to governing Ethanol prices. Before the country's Christmas holidays, Ethanol prices on the week ending 23rd December were observed at USD 750 per MT, FOB Texas (USA).
In addition, temperatures have started to drop rapidly following the approaching winter, which has caused a dramatic rise in natural gas costs and is anticipated to follow the uptrend later in the market. Furthermore, after a relatively mild winter, temperatures have started to drop, which has led to an increase in brent crude oil and natural gas prices. The bulk of energy used in an Ethanol plant comes from burning natural gas to generate steam and heat used in the distilling process. According to market insiders, the international market showcases better demand for the product; however, the snowstorm in the country hampered the demand-supply chain.
The spike in natural gas prices led to a brief rally fuelled by market worries that the increase could force some plants to restrain production rates. Many Ethanol plant operators must make a difficult decision due to diminishing winter temperatures and declining demand for the commodity for blending.
Additionally, the nation's majority of Ethanol plants are situated in the Midwest, known for its chilly, windy winters, which pose threats to the plants. Regardless of whether it produces Ethanol, a plant needs to be heated during the winter to prevent damage from freezing temperatures. As per ChemAnalyst, the Ethanol prices in the U.S. market are further anticipated to follow the stagnancy. The country is facing power outrage, and the industrial outlook is silent, proportionally impacting the final prices of the product.