US ethanol output hits four-week high at 1.07 million barrels a day as gasoline demand slips

US ethanol producers pushed output to a four-week high in early October, averaging 1.07 million barrels a day, close to 45 million gallons. Weekly production rose 1.1 percent on EIA data worked up by the Renewable Fuels Association, and it is running well above the five-year average. The plants are busy. Whether the barrels have anywhere to go is the harder question.

The demand gap

Gasoline consumption fell more than 4 percent to its lowest since late February. Ethanol gets blended into that gasoline, so soft gasoline means soft blending demand no matter how much corn Iowa is crushing. Refinery blending did edge up a touch, but not enough to clear the extra product.

Exports made it worse. Ethanol shipments abroad dropped more than 27 percent on the week, closing off the usual pressure valve when domestic demand weakens. Put weak blending next to weak exports and you get the inventory line: stocks climbed to nearly 24 million barrels, 6 percent higher than a year ago.

For a jobber or a plant in the corn belt, strong production into a rising inventory is the setup that squeezes margins. Keep an eye on whether blending holds or the builds keep stacking.

Indiana reimbursements

Indiana approved a fourth round of gas tax holiday reimbursements, per WFIE. The detail that matters for operators in the state is cash flow: if you fronted the tax at the pump during the holiday window, this is the round that pays it back. Fourth round means the state is still working through the backlog rather than cutting a single check, so confirm which periods this covers before you book it.

Crude near $100 and $111

WTI rose toward $100 and Brent toward $111, pushed by supply draws and geopolitical tensions, per Pluang. For biofuels this cuts the right way. Higher crude lifts the gasoline and diesel barrels ethanol and renewable diesel compete against, which widens the blending economics even with gasoline demand down.

Crude at these levels also puts a floor under RIN values and keeps renewable diesel pencils working, since the spread to petroleum diesel is what pays for the feedstock. If crude eases back off these highs, that math tightens fast.

What to watch

Whether ethanol inventories keep building or blending firms up enough to draw them down. The export number is the swing factor there, so watch next week's shipment data for a bounce off that 27 percent drop. On crude, watch whether the supply draws hold or new barrels come back and pull WTI off $100. And for Indiana operators, confirm which holiday periods the fourth round actually reimburses before you count the money.