Ethanol Falls to Widest Discount to Gasoline in 2 Months

Ethanol’s discount to gasoline widened to the largest gap in two months as inventories of the fuel additive rose to a seasonal high and corn prices slumped on slowing demand.

An Energy Department report last week showed ethanol stockpiles gained 687,000 barrels to 20 million in the seven days ended Dec. 7, the highest for this time of year since at least 2010, when the department began collecting data. As of Dec. 6, corn sales for delivery before Sept. 1 dropped 46 percent to 12.488 million tons from a year earlier, the Agriculture Department reported.

“Ethanol inventories are oversupplied on a seasonal basis and this is putting slight downward pressure on the front of the ethanol curve,” said Mike Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York.

Denatured ethanol for January delivery fell 2.1 cents, or 0.9 percent, to $2.277 a gallon on the Chicago Board of Trade, the lowest price since Sept. 27. The difference between ethanol and gasoline widened to 37.76 cents based on settlement prices, the largest gap since Oct. 17 and up from 36.41 Dec. 14, according to data compiled by Bloomberg.

In cash market trading, ethanol on the West Coast slid 3 cents to $2.43 cents a gallon and in the U.S. Gulf the additive declined 1.5 cents to $2.335, data compiled by Bloomberg show. Ethanol in Chicago decreased 1 cent to $2.275 a gallon and in New York the biofuel gained 3 cents to $2.40.

Gasoline for January delivery slumped 0.75 cent to settle at $2.6546 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery declined 0.9 percent to close at $7.24 a bushel in Chicago, the biggest drop since Dec. 10.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

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

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