Ethanol Outpaces Gasoline on Longest Supply Drop Since 2010

Ethanol outpaced gasoline as plant shutdowns led to the longest streak of weekly supply declines since October 2010.

The spread narrowed 3.74 cents to 68.73 cents a gallon a day after the Energy Information Administration said ethanol inventories fell for a fifth week to a 13-week low and output slipped for the first time since Jan. 25.

“We’ve taken some production offline,” said Chris Manns, an analyst and co-founder of Chicago Traders Group. “Margins are there right now.”

Denatured ethanol for April delivery rose 3.6 cents, or 1.5 percent, to $2.436 a gallon on the Chicago Board of Trade. Prices have gained 11 percent this year.

Gasoline futures for April delivery fell 0.14 cent to $3.1233 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

As many as 20 plants have been idled since June after drought in the Midwest scorched corn crops and raised manufacturing costs for ethanol producers, according to the Renewable Fuels Association in Washington.

Valero Energy Corp. (VLO), the third-biggest U.S. ethanol producer, said Feb. 13 that it resumed output at an Albion, Nebraska, plant because it had become profitable to make the biofuel.

Paying Bills

“Some plants are making money right now,” Manns said. “Nobody’s popping champagne or anything, but they’re paying the light bill. That’s what they want to do until the new crop of corn comes in.”

Corn for March delivery added 3.5 cents, or 0.5 percent, to $7.115 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol. The May contract gained 2.75 cents to $6.9175 a bushel.

The corn crush spread, representing gains or losses from turning corn into ethanol and based on May contracts, was minus 11 cents a gallon, up from minus 12.4 cents yesterday. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

Stockpiles fell to 19.4 million barrels a day last week, about 12 percent lower than a year ago, and production fell to 805,000 barrels a day, or 11 percent lower than last year, the EIA reported yesterday.

Gasoline Pool

Ethanol-blended gasoline made up 94 percent of the total U.S. gasoline pool last week, the highest level since Oct. 5, EIA data show. The EIA is the statistical arm of the Energy Department.

U.S. producers didn’t have to contend with Brazilian imports of the fuel last week. The country didn’t import any of the fuel for the first time since Feb. 1.

Spot ethanol in Sao Paulo cost $2.42 a gallon last week, about even with today’s futures price, data compiled by Bloomberg show.

Concern that domestic ethanol supply and motor fuel consumption are falling has led to an increase in the worth of Renewable Identification Numbers, or RINs, used to track whether refiners are meeting U.S. biofuel-use mandates.

Corn-ethanol based RINs rose to a record 77 cents yesterday from 76 cents on March 5 and up from the 2013 low of 7.1 cents on Jan. 7, data compiled by Bloomberg show.

RINs Values

Advanced RINs, which include biodiesel and Brazilian-made ethanol, fell to 79 cents from a record 81 cents the previous day. The difference in value between the two is the slimmest this year. Advanced RINs were more than five times as costly as the conventional sort on Jan. 7.

In cash market trading, ethanol in New York fell 2 cents to $2.52, dropped 2 cents to $2.41 in Chicago and slipped the same amount in the U.S. Gulf to $2.465, according to data compiled by Bloomberg. On the West Coast, the additive gained 0.5 cent to $2.625.

West Coast ethanol’s premium to the Gulf rose to 16 cents from 13.5 cents yesterday, while Chicago’s discount to New York Harbor was unchanged at 11 cents.

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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