Ethanol’s Discount to Gasoline Expands on Citgo Refinery Fire

Ethanol’s discount to gasoline expanded as the motor fuel surged on concern a refinery fire will curtail supply and as the corn harvest enables companies to boost output of the grain-based additive.

The spread increased 1.23 cents to 76.36 cents a gallon, a day after an Energy Information Administration report showed ethanol output jumped last week to the highest level in 16 months. Gasoline climbed as Citgo Petroleum Corp. had a fire at its Lemont, Illinois, plant.

“Gasoline is an outlier today and that’s because of the Lemont thing,” said Peyton Feltus, president of Randolph Risk Management in Dallas. “It’s the Hamburger Helper effect. With corn on the downside ethanol’s held back.”

Denatured ethanol for November delivery added 2.5 cents, or 1.4 percent, to $1.826 a gallon on the Chicago Board of Trade. Futures are down 17 percent this year.

Gasoline for November delivery rose 3.73 cents, or 1.5 percent, to $2.5896 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 derived primarily from corn in the U.S., with one bushel making at least 2.75 gallons. About 39 percent of a predicted record crop has been harvested, according to the U.S. Agriculture Department.

Corn for December delivery slumped 2.5 cents, or 0.6 percent, to $4.4025 a bushel in Chicago. The December crush spread of corn to ethanol was 7 cents, up from 5 cents yesterday.

Ethanol Production

Ethanol production jumped 3.2 percent to 897,000 barrels a day last week, the most since June 2012, data from the Energy Department’s analytical division show. Stockpiles expanded 0.5 percent to 15.5 million barrels, the highest since Sept. 27, according to EIA.

The Environmental Protection Agency tracks compliance with federal ethanol-use mandates with Renewable Identification Numbers, or RINs, tradable certificates that are attached to each gallon of biofuel.

Corn-based RINs fell 2.5 cents to 24.5 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, tumbled 7 cents to 31 cents, data compiled by Bloomberg show.

The U.S. has made no foreign purchases of the additive since Sept. 27, according to EIA.

Anhydrous ethanol in Sao Paulo cost $2.29 a gallon in the week ended Oct. 18, the highest since June 14, data compiled by Bloomberg show.

In cash market trading, ethanol in New York was unchanged at $2.15 a gallon; on the West Coast prices declined 5.5 cents to $2.165; in the U.S. Gulf the additive lost 1.5 cents to $2.10; and in Chicago the biofuel slid 2.5 cents to $2.02 a gallon, data compiled by Bloomberg show.

West Coast ethanol’s premium to the Gulf narrowed 4 cents to 6.5 cents, the tightest since Oct. 11, while Chicago’s discount to New York expanded 2.5 cents to 13 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

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