Ethanol’s Discount to Gasoline Widens Most in Six Weeks

Ethanol’s discount to gasoline widened the most in six weeks with returns for making the biofuel at the year’s high.

The spread expanded 11.74 cents to 56.11 cents a gallon as ethanol slipped for the first time in seven days and gasoline rose 2.8 percent. The corn crush spread, or the difference between ethanol and the corn needed to make it, rose to 66 cents a gallon, the highest level this year.

“We’ve had a pretty good run up,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “If you’ve got the margin, you’ve got the bushels, why not sell and hedge?”

Denatured ethanol for September delivery slipped 3.5 cents, or 1.4 percent, to $2.473 a gallon on the Chicago Board of Trade, falling from the highest price since July 17. Futures have gained 13 percent this year.

Gasoline for September delivery increased 8.24 cents, or 2.8 percent, to $3.0341 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 is made mostly from corn in the U.S., with one bushel making at least 2.75 gallons of the fuel.

Corn for September delivery slid 16 cents, or 3.1 percent, to $4.9975 a bushel in Chicago. The more actively traded December contract slumped 14.25 cents to $4.8625.

A 2007 energy law requires refiners to use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014. Compliance is tracked by Renewable Identification Numbers, certificates attached to each gallon of ethanol that are submitted to the government each year and that also can be traded among companies.

RINs Prices

Corn-based ethanol RINs decreased 4 cents to 70 cents while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, dipped 2 cents to 78 cents, data compiled by Bloomberg show.

Ethanol production fell 1.5 percent to 844,000 barrels a day in the week ended Aug. 16, from the previous week, the lowest since July 26, according data from the U.S. Energy Information Administration.

Supply was 16.5 million barrels, up 0.4 percent from the previous week and 6.7 percent higher than the record low in the week ended June 28, data from the Energy Department’s analytical arm show.

The department is scheduled to release last week’s production and stockpile figures tomorrow at 10:30 a.m. in Washington.

In cash market trading, ethanol on the West Coast jumped 6.5 cents to $2.83 a gallon; in the U.S. Gulf prices increased 1 cent to $2.74; in Chicago the additive gained 1 cent to $2.65; and in New York the biofuel sank 9 cents to $2.72 a gallon, data compiled by Bloomberg show.

Chicago’s discount to New York Harbor slimmed 10 cents to 7 cents, the smallest since July 23, while West Coast’s premium to the Gulf expanded 5.5 cents to 9 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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.