Ethanol Fluctuates Against Gasoline on Signs of Increased Demand

Ethanol fluctuated against gasoline on speculation demand for the biofuel will climb while stockpiles are at seasonal record lows.

The spread, or price difference, widened 0.13 cent to 29.79 cents a gallon at 11:13 a.m. New York time as the four-week average of gasoline demand has increased 6 percent from this year’s low in January, data from the Energy Information Administration show. Ethanol is blended with the motor fuel to meet federal mandates and stretch supply.

“Gasoline production should continue to ramp up, so that points to a little more demand,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Stockpiles are pretty low.”

Denatured ethanol for July delivery rose 0.9 cent, or 0.4 percent, to $2.45 a gallon on the Chicago Board of Trade. Prices are up 12 percent this year.

Gasoline for July delivery gained 1.03 cent, or 0.4 percent, to $2.7479 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol-blended gasoline made up about 94 percent of the total U.S. gasoline pool in the week ended June 14, data from the EIA, the Energy Department’s analytical arm, show.

Fuel Output

Production of the biofuel fell 1.2 percent to 873,000 barrels a day, the first back-to-back decline since March and down 3 percent from a year earlier, according to EIA.

Stockpiles of the fuel gained 2.9 percent to 16.5 million barrels, the EIA’s report showed. That’s down 22 percent from a year earlier.

Blackford said ethanol production may decline during the latter part of July and August as corn supply becomes tighter before this year’s harvest and plants perform routine maintenance.

Corn for July delivery climbed 1.75 cents to $6.55 a bushel in Chicago. The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was 7 cents at 11:36 a.m., up 1 cent from yesterday, data compiled by Bloomberg show.

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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