Ethanol Weakens Against Gasoline on Higher Inventory and Imports

Ethanol’s discount to gasoline widened to the largest gap in more than a week on ample stockpiles and higher imports for the fuel additive.

The spread swelled 1.41 cents as gasoline surged on speculation that refinery repairs will reduce inventories. Ethanol stockpiles in the week ended Jan. 11 were 20.4 million barrels, up 4.2 percent from a year earlier, while imports averaged 27,000 barrels a day, compared with none a year ago, the Energy Information Administration said.

‘Gasoline won’t hold ethanol up, it’s more from corn,’’ said Peyton Feltus, president of Randolph Risk Management Inc. in Dallas. “While ethanol is closely related to gasoline, it’s born of corn.”

The grain-based additive was 43.59 cents cheaper than gasoline, based on prompt-month settlement prices for both commodities, the highest level since Jan. 11. The spread was 42.18 cents Jan. 18.

Denatured ethanol for February delivery advanced 1.9 cents, or 0.8 percent, to $2.394 a gallon on the Chicago Board of Trade, the highest level since Dec. 6. Prices have advanced 12 percent in the past year.

In cash market trading, ethanol on the West Coast jumped 9 cents, or 3.7 percent, to $2.555 a gallon and in the U.S. Gulf the additive increased 6 cents, or 2.5 percent, to $2.455, data compiled by Bloomberg shows.

Spot Prices

Chicago ethanol gained 4.5 cents, or 1.9 percent, to $2.39 a gallon and in New York the biofuel rose 1 cent to $2.455.

Gasoline for February delivery climbed 3.31 cents, or 1.2 percent, to $2.8299 a gallon on the New York Mercantile Exchange.

Corn for March delivery gained 1 cent to $7.285 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

U.S. ethanol makers have tempered production in the face of higher corn prices caused by drought and the supply glut.

Output in the week ended Jan. 11 fell to 784,000 barrels a day, the lowest since the U.S. Energy Department’s statistical unit began tracking weekly data in June 2010.

Aemetis Inc. (AMTX), a U.S. ethanol producer, idled production at its plant in Keyes, California, citing “unprofitable market conditions for corn ethanol,” and will upgrade the operation to make fuel from sorghum as well, it said today.

Abengoa SA (ABG), a Spanish engineering and renewable energy company, said Jan. 16 it halted output at ethanol mills in York and Ravenna, Nebraska, until market conditions improve.

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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