Ethanol-Gasoline Gap Widens on Imports, Domestic Output

Ethanol’s discount to gasoline widened as the biofuel fell, capping its worst monthly performance since May on increased imports and advances in domestic production.

Ethanol’s discount to gasoline expanded 1.61 cents to 62.2 cents a gallon based on January futures contracts, the widest differential since September 28. The biofuel’s price declined 9.1 percent this month while gasoline increased 1.8 percent.

Imports have averaged 27,000 barrels a day in 2012, compared with 6,000 in the previous year, according to Energy Department data compiled by Bloomberg. Production rose 12,000 barrels to 834,000 barrels in the week ended Dec. 21, the department reported last week.

Denatured ethanol for January delivery declined 0.2 percent, or 0.4 cent to $2.19 a gallon on the Chicago Board of Trade, the lowest settlement since June 26. Futures sank 6.6 percent in the fourth quarter, and 0.6 percent this year.

In cash market trading, ethanol was unchanged in New York at $2.285 a gallon, on the Gulf Coast at $2.215, on the West Coast at $2.35 and in Chicago at $2.185, according to data compiled by Bloomberg.

Gasoline futures gained on speculation negotiators will reach a last-minute U.S. budget deal, helping to prevent a dip in demand for the motor fuel.

Gasoline for January delivery added 1.21 cents, or 0.4 percent, to settle at $2.812 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations. January contracts expired at the close of floor trading today.

Corn for March delivery rose 0.6 percent to $6.9825 a bushel in Chicago.

Based on March contracts for corn and ethanol, producers are losing 31 cents on each gallon of the fuel made, up from 34 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.

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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