Ethanol Rises to One-Week High as Discount Encourages Blending

Ethanol futures rose to a one-week high in Chicago on speculation the fuel’s discount to gasoline will encourage increased use.

Prices gained as refiners stand to take advantage of a 43.75-cent discount to gasoline. The motor fuel’s premium to the additive has more than tripled from its 2012 low of 15.6 cents on July 17 as rising crude-oil prices sent gasoline futures up 6.4 percent. Ethanol is typically blended into gasoline at a level of 10 percent.

“Blend spreads are pretty good with crude up here,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois.

Denatured ethanol for September delivery rose 0.3 cent to settle at $2.59 a gallon on the Chicago Board of Trade, the highest price since Aug. 10. Prices have gained 18 percent this year.

Babler said an influx of imports is placing a cap on how much ethanol increases.

The U.S. imported 93,000 barrels of ethanol a day in the week ended Aug. 10, up from none a year earlier, Energy Department data show. It was the highest since the agency began tracking weekly data for the biofuel in June 2010.

In cash market trading, ethanol in the U.S. Gulf was unchanged at $2.63 a gallon and on the West Coast the additive dropped 2 cents, or 0.7 percent, to $2.725, according to data compiled by Bloomberg.

Ethanol in New York slipped 1 cent, or 0.4 percent, to $2.63 a gallon and in Chicago the biofuel added 0.5 cent to $2.565.

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

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