* 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.
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.
Phil Pia, broker for Societe Generale in New York, said: “Petrobras raised the price of gasoline, anhydrous (ethanol) prices are already higher. That’s supportive of sugar.”
Kona Haque, head of research at ED&F Man, said the sugar market had not been expecting the announcement.
“It was a surprise,” Haque said. “This is a bit of bullish news. Ethanol prices have moved up, and this will affect sugar.”
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 was up 0.47 cents, or 3.8 percent, at 12.93 cents per lb at 1424 GMT, after hitting a two-month high of 13.00 cents.
The front-month raw sugar futures contract was on course to end the third quarter little changed compared with the end of the second quarter.
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 $10.80, or 3.0 percent, at $372.40 per tonne.
In coffee, the ICE December arabica contract traded up 0.4 cents, or 0.3 percent, at $1.2125 per lb.
The front-month arabica contract was set to end the third quarter around 7 percent lower than at the end of the second quarter.
November robusta coffee on ICE traded down $3, or 0.2 percent, at $1,573 a tonne.
London December cocoa lost 29 pounds, or 1.3 percent, to 2,150 pounds, dropping further from Friday’s 4-1/2 year peak of 2,256 pounds.
New York December cocoa was down $49, or 1.5 percent, at $3,133 per tonne. (Additional reporting by Chris Prentice in New York; Editing by David Clarke and Pravin Char)