Ethanol Narrows Gap to Gasoline as Output Fails to Lift Supplies

Ethanol rose against gasoline on concern production of the additive hasn’t increased enough to refill stockpiles that are at record seasonal lows.

The biofuel’s discount narrowed 3.71 cents to 93.05 cents a gallon. Output of ethanol jumped 5.2 percent to 875,000 barrels a day last week, while inventories sank a third week to 15.5 million barrels, 0.4 percent higher than the all-time low on June 28, Energy Information Administration data show.

“The inventory story has some whiskers,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “The market’s waiting for that first big pop in stocks to show up.”

Denatured ethanol for November delivery advanced 0.8 cent, or 0.5 percent, to $1.68 a gallon on the Chicago Board of Trade.

Gasoline for November delivery fell 2.91 cents, or 1.1 percent, to $2.6105 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

The additive is made mostly from corn in the U.S. The harvest for the grain is under way until November.

About 12 percent was collected as of Sept. 27, up from 7 percent the previous week, data from the U.S. Agriculture Department show.

Kitt said he expects ethanol prices to slide as more corn becomes available and companies boost output.

“The die is kind of cast here,” he said.

Corn for December delivery gained 1.25 cents to $4.4025 a bushel in Chicago. The December corn crush spread of corn to ethanol was 1 cent, up from break-even yesterday.

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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