Ethanol Discount to Gasoline Widens After U.S. Production Rises

Ethanol’s discount to gasoline widened after the U.S. reported production rose to a 16-month high and inventories dropped to the lowest level on record.

The spread expanded 4 cents to 84.88 cents a gallon after output increased 1.6 percent to 911,000 barrels a day in the week ended Oct. 25, the most since June 8, 2012, according to the Energy Information Administration. That was above the 907,000-barrel average of 11 analyst estimates compiled by Bloomberg. Inventories fell 3.5 percent to 15 million barrels, the least in EIA data going back to 2010.

“In the end, concerns over low inventories prevailed,” Chris Krukowski, an ethanol broker at SCB & Associates LLC, said in a telephone interview from Chicago. “Fuel demand is good, and we’ve seen some activity in exports, too.”

Denatured ethanol for November delivery rose 0.1 percent to $1.802 a gallon on the Chicago Board of Trade. Futures are down 18 percent this year.

November-delivery gasoline advanced 4.1 cents to close at $2.6508 on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

RINs, certificates attached to each gallon of corn-based ethanol that are submitted to the government and can be traded among companies, gained 0.5 cent to 23 cents a gallon. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, rose 1 cent to 29 cents.

Corn for December delivery declined 1.75 cents, or 0.4 percent, to $4.3025 a bushel in Chicago, as U.S. output may soar to a record 14 billion bushels from a year earlier, the U.S. Department of Agriculture said Sept. 12. The December crush spread of corn to ethanol was 10 cents, up from 9 cents yesterday.

In cash market trading, ethanol declined 4 cents to $1.89 a gallon in Chicago, 3 cents to $2.015 in New York, and 3 cents to $1.97 on the Gulf Coast, while it rose 4 cents to $2.075 a gallon on the West Coast, data compiled by Bloomberg show.

West Coast ethanol’s premium to the Gulf rose by 7 cents to 10.5 cents, while Chicago’s discount to New York Harbor declined 1 cent to 12.5 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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