Ethanol futures declined for the first time this week on concern that the market is oversupplied.
Prices pared two days of gains after an Energy Department report showed stockpiles jumped 2.5 percent to 21.2 million barrels, the biggest weekly increase since May 18. The glut has led Valero Energy Corp.. (VLO), the third-largest U.S. ethanol producer, to idle output at its 110 million-gallon-a-year plant in Albion, Nebraska, until margins improve.
“You know it’s bad when they’re shutting down,” said Jerrod Kitt, an analyst at Linn Group in Chicago.
Denatured ethanol for July delivery slid 2.3 cents, or 1.1 percent, to $2.089 a gallon on the Chicago Board of Trade. Prices have fallen 5.2 percent this year.
In cash market trading, ethanol on the West Coast dropped 2.5 cents, or 1.2 percent, to $2.155 a gallon and in the U.S. Gulf the additive lost 2 cents to $2.135, according to data compiled by Bloomberg.
Production of the biofuel fell 2.2 percent last week to 900,000 barrels a day, the lowest level since May 4 and the steepest drop since Feb. 24, Energy Department data showed.
The fuel, made from corn in the U.S., is blended with gasoline to stretch supply and meet federal mandates.
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