* Big raw sugar delivery seen in expiry
* Brazil’s Petrobras raises gasoline and diesel prices (Adds trade comment, updates prices)
By David Brough
LONDON, Sept 30 (Reuters) - ICE raw sugar futures rallied more than 4 percent to a two-month high on Wednesday after Brazil’s oil firm Petrobras said it would raise fuel prices, potentially boosting demand for cane-based ethanol.
Arabica coffee and cocoa futures eased, pressured by a stronger dollar.
Petrobras is raising gasoline prices by 6 percent and diesel by 4 percent at refineries in Brazil. This may encourage drivers using flex-fuel vehicles to use more cane-based ethanol biofuel, thereby reducing the amount of sugar made from cane.
“The miller (in Brazil) will produce more ethanol and less sugar,” a senior Western analyst said.
Traders also referred to an increasingly bullish outlook for tighter supplies in the crop year that begins on Oct. 1.
The most-active ICE March 2016 raw sugar contract surged 0.51 cent, or 4.1 percent, at 12.97 cents per lb at 1314 GMT, after hitting a two-month high of 12.98 cents.
Traders expected a cash delivery of about 1 million tonnes of largely Brazilian sugar against the expiry of the ICE October futures contract on Wednesday, along with small quantities expected from Thailand and possibly Central America.
“The delivery itself will partially be a function of how the spread ends up but at current levels it looks as if there is a good tonnage of Brazilian sugar in the tape,” a senior European trade source said.
ICE December white sugar was up $12.10, or 3.4 percent, at $373.70 per tonne.
In coffee, the ICE December arabica contract traded down 0.55 cents, or 0.5 percent, at $1.2030 per lb.
November robusta coffee on ICE traded down $10, or 0.6 percent, at $1,566 a tonne.
“A close below $1,557 opens the potential for further declines towards the key support level at $1,500,” said Myrto Sokou, a senior research analyst with Sucden Financial.
London December cocoa lost 21 pounds, or 1 percent, to trade at 2,158 pounds, dropping further from Friday’s 4-1/2 year peak of 2,256 pounds.
New York December cocoa was down $28, or 0.9 percent, at $3,154 per tonne. (Editing by David Clarke)