Ethanol’s Discount to Gasoline Stepest in Two Months

Ethanol’s discount to gasoline futures weakened to the widest level in two months on ample stockpiles of the biofuel.

Ethanol futures fell to the lowest price since June 28 on the Chicago Board of Trade after an Energy Department report showed stockpiles rose 4 percent last week to 20.8 million barrels, the most in six months. Imports more than tripled to 37,000 barrels a day from 12,000 the previous week.

These are “tough times for ethanol producers,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “That was a big, big stocks number. There’s plenty out there.”

Ethanol’s discount to gasoline expanded to 52.91 cents a gallon, the widest spread since Oct. 10, based on futures settlement prices. It was 43.59 cents yesterday. The differential has averaged 61.25 cents this year.

Denatured ethanol for January delivery fell 4.1 cents, or 1.8 percent, to $2.214 a gallon in Chicago. The futures have tumbled 19 percent in the past five months.

In cash market trading, ethanol was unchanged in Chicago at $2.25 a gallon and in the U.S. Gulf at $2.315, data compiled by Bloomberg show.

Ethanol on the West Coast slumped 4.5 cents to $2.365 a gallon and in New York the additive sank 2 cents to $2.33.

Gasoline Gains

Gasoline for January delivery rose 5.22 cents, or 1.9 percent, to settle at $2.7431 a gallon on the Nymex. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Babler said ethanol’s discount to the motor fuel hasn’t been enough to stoke demand in the face of the glut.

“It’s a good blend spread, but it doesn’t look like anyone wants it,” he said.

Ethanol-blended gasoline made up about 93 percent of the total U.S. gasoline pool last week, up from 90 percent in the seven days ended Dec. 7, the Energy Department report showed. The fuel has averaged about 91 percent this year.

Corn for March delivery fell 17 cents, or 2.4 percent, to $7.03 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts for corn and ethanol, producers are losing 32 cents on each gallon of the fuel made, down from 33 cents yesterday, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, according to data collected by Bloomberg.

Ethanol on the Brazilian spot market is fetching $2.06 a gallon, data compiled by Bloomberg show.

The value of Renewable Identification Numbers, known as RINs, sank 15 percent to 4.76 cents, data compiled by Bloomberg show. RINs are credits that help the government track whether refiners are meeting 2012 federal ethanol use mandates.

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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