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B Grade drifts against firmer US backdrop

Asian B Grade ethanol prices continued to drift as the market struggled to attract sufficient liquidity to recalibrate levels against a slightly firmer international backdrop on Monday. Spot buying interest fob Korea lingered at $470/m³ in search of firm sell side interest, with B grade hydrous prices fob Brazil sticking around $410/m³ on Friday.

November indications in the Ulsan market were talked around $470/m³, indicating a backwardation in the forward structure in contrast to the shallow contango built into the Brazilian market. The steep rally in oil prices at the tail end of last week lent some slight upward impetus to US ethanol markets, although domestic gasoline and ethanol markets will continue to contend with weakening demand as summer driving profiles fade.

US forward curves remain in shallow backwardation, with December Chi Platts discounted to the prompt by almsot 5¢/gal. Sustained strength in international gasoline prices should lend support to blend economics and brighten export arbitrage opportunities for US and Brazilian fuel grade producers.

MS – 31/08/2015

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