Crude oil’s rise may boost US biodiesel demand

07 May 2009 20:26  [Source: ICIS news]

HOUSTON (ICIS news)--US biodiesel producers could see limited relief as crude oil’s recent rise makes their product more attractive to blenders, sources said on Thursday.

Selling biodiesel in the US proved tough as crude oil prices hovered at $40s/bbl earlier this year, making blenders think twice about buying higher-priced renewable fuels.  

But with crude’s recent, steady rise - it hit $57.56 mid-day on Thursday during NYMEX trading - some biodiesel producers are starting to hope higher sales may be on the way. Lower-cost fatty acid methyl esters (FAME) could particularly benefit, sources said.

“That will help, definitely,” one producer said. “If crude oil goes up, interest will be piqued for FAME, especially in the summer months.”

FAME is cheaper to produce than soy methyl esters (SME) but tends to gel at higher temperatures, making it less marketable in colder months. Global chemical market intelligence service ICIS pricing assesed FAME at $2.35-2.47/gal (€0.47-0.49/litre)  FD (free delievered) Midwest on 30 April.

SME might miss the wave, however. Feedstock bean oil prices have only now taken a break from steady rises on the Chicago Board of Trade (CBOT), a trader said. Bean oil contracts for May hit 39 cents/lb ($860/tonne) in mid-day trading on Thursday, up from 36.22 cents/lb at market close the week before.

SME was assessed at $2.59-2.76/gal on 30 April, according to ICIS pricing.

“If we can keep crude oil going up, that might help. Bean oil is going up faster than crude, though,” the trader said.  

US biodiesel sales have plummeted since the EU introduced tariffs on US product. The National Biodiesel Board (NBB) said two-thirds of the country’s nearly 180 biodiesel refineries have been idled, sending March production to 30m gal (114m litres), down 39% from the same month the year before and the lowest level in two years.

($1 = €0.75)

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By: Ben Lefebvre
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