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Ethanol Snaps Five-Day Losing Streak as Lower Prices Stoke Use

Ethanol rose for the first time in six days on speculation that prices near the lowest level in three years will boost consumption of the biofuel.

Futures climbed 1.7 percent, narrowing the discount to gasoline by 7.29 cents to 86.81 cents a gallon. Ethanol is blended with gasoline to stretch supply and meet federal mandates.

“It’s definitely a bargain,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “Prices are pretty depressed.”

Denatured ethanol for December delivery rose 2.8 cents to $1.635 a gallon, rebounding from the lowest level since July 26, 2010, and the biggest one-day gain since Oct. 25. Futures dropped in the previous five sessions, the longest streak of declines since Aug. 9. Prices have plunged 25 percent this year.

Gasoline for December delivery fell 4.49 cents, or 1.8 percent, to $2.5031 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 prices have plummeted 40 percent from this year’s high of $2.744 a gallon in May as farmers collect what’s projected to be a record corn crop, helping companies boost output.

Corn for December delivery slipped 0.75 cent to $4.205 a bushel in Chicago a day after touching a three-year low. One bushel of the grain makes at least 2.75 gallons of ethanol.

The December crush spread of corn to ethanol was 11 cents, up from 8 cents yesterday, data compiled by Bloomberg show.

Awaiting Report

Damask said ethanol prices are also getting a boost today from traders who are hesitant to be caught short of supply before the U.S. Agriculture Department World Corn Supply and Demand Statistics Estimates report, scheduled to be released at noon tomorrow in Washington.

Ethanol production last week averaged 902,000 barrels a day, up 17 percent from the record low in January, the U.S. Energy Information Administration said in a report yesterday.

That hasn’t been enough to lift stockpiles of the biofuel from record seasonal lows, according to data compiled by Bloomberg.

Inventories were at 15.2 million barrels last week, down 16 percent from a year earlier, data from the Energy Department’s statistical arm show.

The U.S. tracks compliance with the biofuel consumption standards by using Renewable Identification Numbers, or certificates attached to each gallon of ethanol, that are submitted to the government and also traded among refiners.

Corn RINs

Corn-based ethanol RINs slid 2 cents to 26 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, dropped 3 cents to 34 cents, data compiled by Bloomberg show.

In cash market trading, ethanol in New York lost 1 cent to $1.93 a gallon; in Chicago prices slipped 0.5 cent to $1.695; in the U.S. Gulf the additive dropped 0.5 cent to $1.795; and on the West Coast the biofuel jumped 10 cents to $1.95 a gallon, data compiled by Bloomberg show.

The West Coast’s premium to the Gulf expanded 10.5 cents to 15.5 cents, while Chicago’s discount to New York Harbor narrowed 0.5 cent to 23.5 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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