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Ethanol Rises Versus Gasoline Record Low Seasonal Stockpiles

Ethanol futures rose against gasoline on speculation that the fall corn harvest won’t reach distilleries quickly enough to replenish supplies at record seasonal lows.

The spread, or price difference, tightened 8.19 cents to 81.62 cents a gallon, a day after the Energy Information Administration said stockpiles of ethanol fell last week to 16.2 million barrels, down 16 percent from a year earlier and an all-time low for the time of year.

“Overall, the market has a short-term bullish tone to it as material is still tough to come by for the next few weeks,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York.

Denatured ethanol for October delivery rose 3.7 cents, or 2 percent, to $1.881 a gallon on the Chicago Board of Trade. Futures have dropped 14 percent this year.

Gasoline for October delivery slumped 4.49 cents, or 1.6 percent, to $2.6972 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 from corn in the U.S. The country’s harvest is usually from September to November.

Corn for December delivery added 3.25 cents, or 0.7 percent, to $4.595 a bushel in Chicago. The December crush spread of corn to ethanol was minus 2 cents a gallon, unchanged from yesterday. All of the crush spreads through 2015 are negative.

Ethanol Output

Ethanol production fell 1.2 percent to 838,000 barrels a day last week, the EIA, Energy Department’s analytical arm, said yesterday.

The biofuel is part of the country’s plan to reduce dependence on petroleum. Compliance with federal consumption targets is tracked by Renewable Identification Numbers, or RINs, that are attached to each gallon of ethanol and that can be traded among refiners.

Corn-based-ethanol RINs added 5 cents to 57 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, jumped 8 cents to 69 cents, data compiled by Bloomberg show.

Regionally, stockpiles are down 20 percent in the Midwest from last year and 21 percent lower along the East Coast, EIA data show. That’s caused spot prices to surge, said Jim Damask, a manager at StarFuels Inc., in Jupiter, Florida.

In cash market trading, ethanol rose 54 cents to $2.90 a gallon in Chicago, 14 cents to $2.325 in New York, 9 cents to $2.40 on the West Coast and 3 cents to $2.475 a gallon on the Gulf Coast, data compiled by Bloomberg show.

The West Coast’s discount to the Gulf shrank by 6 cents to 7.5 cents, while Chicago’s premium to New York Harbor expanded 40 cents to 57.5 cents, the widest in records going back to February 2007.

Imports last week fell 80 percent to 3,000 barrels a day, the smallest amount since June 28, when the country made no foreign purchases of the fuel.

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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