UPDATE 2-Canadian National stops deliveries of ethanol rails to Argo hub sources

(Rearranged with company confirmation, adds CN comment)

NEW YORK / CHICAGO, September 13 (Reuters) – Canadian National Railway Co. has stopped delivering ethanol by rail to Kinder Morgan's Argo terminal near Chicago, calling congestion and oversupply, the company confirmed on Thursday.

The embargo, initially imposed on September 5, could be lifted on Friday, according to the company in an e-mail to Reuters.

Delivery to the main US ethanol drop-off point and home for the benchmark pricing of cash prices is the last sign of a growing stock of ethanol supplies at the pace of escalating trading wars and flat domestic demand.

The increasing trade disputes of US President Donald Trump have forced American ethanol producers to seek new export markets or reduce production.

The disruption of deliveries has had no effect on prices, which are already on long-term lows, traders said.

Canadian National said it imposed the embargo to manage the number of incoming cars in the facility.

"CN is currently working with its supply chain partners and customers to process inventory inventory in the facility and restore incoming traffic," said Patrick Waldron spokesperson for the company in an email on Thursday.

US ethanol stocks have swollen to near-record highs in recent weeks.

Commodities giant Archer Daniels Midland has accelerated sales to the Argo trading center in recent months, leading to lower prices in the mid-west of the United States and shocking the company's rivals, according to traders and regulatory data.

"It is bad for them," said a trader. "It can really influence their ability to work."

ADM did not immediately respond to requests for comments. (Reporting by Jarrett Renshaw in New York and Michael Hirtzer in Chicago; Montage by Dan Grebler and Bernadette Baum)

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