Ethanol Declines to 11-Month Low on Ample Supply, Bottlenecks

Ethanol futures declined to the lowest price in more than 11 months amid ample output and transportation bottlenecks.

Futures fell after an Energy Department report showed production rose 2.6 percent last week to a record 954,000 barrels a day and stockpiles climbed 5.2 percent to 17.9 million barrels, the highest level since Aug. 19.

“It’s fading here,” said Will Babler, a broker at First Capitol Risk Management Inc. in Galena, Illinois. “We’re running into a little bit of a bottleneck. There’s no shortage of product.”

Denatured ethanol for January delivery fell 5.6 cents, or 2.6 percent, to $2.125 a gallon on the Chicago Board of Trade, the lowest price since Dec. 10, 2010. Prices have fallen 11 percent this year.

In cash market trading ethanol in the U.S. Gulf slumped 10 cents, or 3.9 percent, to $2.475 a gallon and in New York the additive dropped 8 cents, or 3.2 percent, to $2.445, according to data compiled by Bloomberg.

Ethanol in Chicago slid 8 cents, or 3.3 percent, to $2.345 a gallon and on the West Coast the biofuel dropped 2.5 cents, or 1 percent, to $2.50.

Babler said the rush to blend the fuel before a 45-cent tax credit expires on Dec. 31 increased ethanol demand and that the absence of a dedicated pipeline is now weighing on prices.

Unlike gasoline, ethanol is delivered to filling stations via barge, truck or rail.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net