Ethanol Weakens Against Gasoline on Above-Average Stockpiles

Ethanol weakened against gasoline with stockpiles of the biofuel at a six-month high.

Futures have fallen 7.5 percent this month, poised for the worst monthly performance since September, as inventories in the week ended Dec. 14 were 20.8 million barrels, up 18 percent from a year earlier. The discount to gasoline makes ethanol more attractive to blenders who stand to pocket the difference between the two fuels.

“You’re at a pretty attractive price point relative to gasoline,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “You’ve really improved your competitiveness to gasoline.”

Ethanol’s discount to the motor fuel expanded to 52.26 cents a gallon New York time based on settlement prices. It was 50.97 cents Dec. 21 and 18.79 cents on Dec. 6. The differential has averaged about 61 cents this year.

Denatured ethanol for January delivery rose 0.3 cent to settle at $2.228 a gallon on the Chicago Board of Trade.

In cash market trading, ethanol was unchanged in New York at $2.32 a gallon, in Chicago at $2.21, in the U.S. Gulf at $2.265 and on the West Coast at $2.355 a gallon, data compiled by Bloomberg shows.

Gasoline for January delivery advanced 1.59 cents, or 0.6 percent, to $2.7506 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 added 2.25 cents, or 0.3 percent, to $7.0425 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 30 cents on each gallon of the fuel made, up from 29 cents Dec. 21, 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.

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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