Ethanol Snaps Five-Day Skid as Lower Prices Spurs Blending

Ethanol futures snapped the longest losing streak since September as lower prices for the fuel spurred blending demand.

The biofuel gained as ethanol’s 41.2-cent discount to gasoline encouraged refiners to blend more of the additive to take advantage of the spread between the two. Production of conventional gasoline blended with ethanol averaged 5.15 million barrels a day last week, according to the Energy Department, 3.6 percent higher than a year earlier.

“This latest break really took away producer margin, but you’ve returned margin back to the blender,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “Yes, this has been an ugly break but you are turning on some demand here.”

Denatured ethanol for January delivery advanced 1.3 cents, or 0.6 percent, to $2.075 a gallon on the Chicago Board of Trade, the first gain since Dec. 8. Futures fell 1.9 percent this week and are down 13 percent this year.

In cash market trading, ethanol in New York sank 3 cents, or 1.3 percent, to $2.28 a gallon and in the U.S. Gulf the biofuel declined 2 cents, or 0.9 percent, to $2.315, according to data compiled by Bloomberg.

Ethanol in Chicago slipped 0.5 cent to $2.185 a gallon and on the West Coast the additive decreased 0.5 cent to $2.295.

Corn for March delivery rose 4 cents, or 0.7 percent, to $5.83 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

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