Ethanol’s Discount to Gasoline Narrows With Supply at 7-Week Low

Ethanol’s discount to gasoline narrowed with stockpiles of the additive at the lowest level in seven weeks and as the motor fuel slumped on reduced prospects for a strike on Syria.

The spread, or price difference, shrank 2.64 cents to 57.5 cents a gallon. Ethanol inventories dropped last week to 16.3 million barrels, a record low for this time of year, data compiled by Bloomberg show. Prices for the biofuel are on pace for the biggest monthly gain since January.

“Stockpiles are definitely low,” said David Dunn, an analyst and broker at Progressive Fuels Ltd. in Naples, Florida. “That’s what you saw in the big rebound.”

Denatured ethanol for September delivery fell 1.5 cents, or 0.6 percent, to $2.45 a gallon on the Chicago Board of Trade. Futures have gained 12 percent this year.

Dunn said traders are focused on the more actively-traded October ethanol contract, which is trading at a discount of more than 45 cents to September.

“You had ethanol plants offline that should come back online,” Dunn said. “People are expecting a bounce-back in production.”

Gasoline for September delivery tumbled 4.14 cents, or 1.4 percent, to $3.025 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

U.K. Stand

The motor fuel rose after the U.K. House of Commons rejected Prime Minister David Cameron’s plan for a military response against Syria and its suspected use of chemical weapons against civilians.

Corn for September delivery declined 2 cents, or 0.4 percent, to $4.9525 a bushel in Chicago. The more actively traded December contract sank 3.25 cents to $4.7825.

The corn crush spread, or the price difference between a gallon of ethanol and the corn needed to make it, was 65 cents, down from 65.68 cents yesterday.

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.

Corn-based ethanol RINs added 1 cent to 68 cents, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, rose 1 cent to 73 cents.

Ethanol production fell 2.8 percent to 820,000 barrels a day last week, the least since March 29, data from Energy Information Administration show.

Stockpiles slid 1.4 percent to 16.3 million barrels, the lowest level since July 5, and imports plunged 79 percent to 4,000 barrels a day, the Energy Department’s research arm said.

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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