- Wednesday, October 16, 2024
In the Chicago bulk market, ethanol spot prices experienced a significant decline in January due to soft winter blending demand. However, even amidst this downturn, the biofuel managed to maintain a blending advantage over gasoline by doubling its discount.
According to OPIS daily assessments, Chicago-area in-tank ethanol transfers averaged $1.59/gal in January, resulting in an 8-cent decrease compared to the previous month. In contrast, spot CBOB gasoline blendstock averaged $1.806/gal, marking a 2.6-cent increase from December. This increase in gasoline prices nearly doubled the discount for ethanol, creating a price differential of 21.6 cents per gallon.
Despite this favorable situation, blenders faced additional challenges during the first month of 2024. The value of Renewable Identification Number (RIN) credits experienced significant pressure, with current-year D6 ethanol credits averaging 71.69 cents/RIN in January. This represents a 9.4-cent decline, or an 11.6% decrease, from the previous month's average.
Overall, while ethanol spot prices faced a downward trend in January, the biofuel managed to remain competitive against gasoline due to its doubling discount. However, blenders had to navigate the challenges posed by declining RIN credit values during this period.
Ethanol Blend Prices Experience a Decline in RIN Credit Values
The spot-basis cost of a typical 10% ethanol blend in the Chicago market has been impacted by a decline in RIN credit values for blending ethanol. This has resulted in a discount to gasoline that is only slightly higher than the previous month. In January, the average cost of E10 was $1.712/gal, which is a 2.4 cent increase from the previous month. However, it is still 9.4 cents cheaper than the unblended CBOB spot average. This cost difference increased by just 0.2 cent, or around 2.2%, on a month-to-month basis.
Comparatively, a year ago in January, E10 calculations had an 18.8 cent cost advantage over CBOB spots in the Chicago market. Since then, ethanol spot prices have dropped by 27.3% and CBOB spot prices have decreased by 25%. However, during January, RIN credit values were less than half of their average from a year ago, experiencing a decline of almost 57%.
Throughout the last week of January, there was further pressure on RIN credit prices. Current-year D6 trades averaged 58.96 cents/RIN, which is approximately 17.8% lower than the full-month average. Simultaneously, ethanol spots saw a slight increase of 1.6 cents above the full-month average at $1.606/gal, while CBOB averaged $1.855/gal and gained 4.9 cents. These changes resulted in E10 calculations reaching $1.771/gal and narrowing its cost advantage over CBOB to 8.4 cents per gallon during that week.
OPIS is a reliable and independent source for oil price information. It is operated by Dow Jones & Co., providing valuable insights into the market. With no affiliation to Dow Jones Newswires and The Wall Street Journal, OPIS focuses solely on delivering accurate and up-to-date data.
Reporting and Editing
The reporting for OPIS is handled by Spencer Kelly, while Michael Kelly takes charge of the editing process. They work diligently to ensure the content is of the highest quality and meets the standards set by OPIS.
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