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Ethanol-Gasoline Discount Narrows on Harvest Delays as RINs jump

Ethanol’s discount against gasoline narrowed for a third straight session as rains may slow the corn harvest in the U.S., reducing supplies to distillers amid mounting concern over record low biofuel inventories.

The spread tightened 4.8 cents to settle at 87.58 cents a gallon as showers forecast through tomorrow may hinder harvest in parts of the U.S. Midwest, Commodity Weather Group said in an e-mailed report yesterday.

“Ethanol stockpiles are low and you have rains potentially reducing supplies of the raw material to distillers in the short term,” said Nelson Ostanello, chief executive officer at the Brazilian arm of London-based Greenergy Fuels Holdings Ltd. “This definitely doesn’t look good,” he said today in a telephone interview from Sao Paulo.

November-denatured ethanol rose 4.1 cents, or 2.4 percent, to close at $1.784 a gallon on the Chicago Board of Trade. Futures have slipped 19 percent this year.

Gasoline for November delivery slid 0.7 cent, or 0.3 percent, to $2.6598 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn-based Renewable Identification Numbers, or RINs, gained 2 cents to 34 cents a gallon. RINs are certificates attached to each gallon of biofuel that are submitted to the government and can be traded among companies.

Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, soared 7 cents to 49 cents a gallons.

Ethanol Mandate

“RINs are still enjoying support from the EPA saying that no decision has been made on the mandate cut,” Martinho Ono, CEO of Sao Paulo-based brokerage SCA Etanol do Brasil, said in a telephone interview. “Still, at these levels I don’t see the U.S. either importing or exporting any ethanol from Brazil.”

Corn for December delivery climbed 6.5 cents, or 1.5 percent, to $4.435 a bushel in Chicago. The December crush spread of corn to ethanol was unchanged at 5 cents.

U.S. inventories of ethanol slumped to a record low of 15.4 million barrels in the week ended Oct. 4, data from the U.S. Energy Information Administration show.

In cash market trading, ethanol rose 1.5 cents to $2.315 a gallon in New York and gained 2 cents to $2.10 in Chicago, data compiled by Bloomberg show. Prices were unchanged at $2.275 on the West Coast and increased 1.5 cents to $2.195 a gallon on the Gulf Coast,

New York’s premium to Chicago narrowed 0.5 cent to 21.5 cents, while the West Coast’s premium to the Gulf slipped 1.5 cents to 8 cents.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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