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Ethanol Advances for Fourth Day With Stockpiles at Lows

Ethanol extended its longest streak of gains in almost two months with stockpiles at a record low for the time of year.

Futures jumped 2.1 percent as the Energy Information Administration may report tomorrow that the supply of gasoline declined last week. Ethanol inventories are down 26 percent from this year’s high in January, according to the Energy Department’s statistical arm.

“We do have fairly tight supply,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “It’s had a better bias, a firmer tone.”

Denatured ethanol for December delivery rose 3.6 cents to $1.742 a gallon on the Chicago Board of Trade. The gain was the fourth in a row, the most since Sept. 19. Prices have dropped 20 percent this year.

Gasoline for December delivery decreased 1.01 cents, or 0.4 percent, to $2.5864 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’s discount to gasoline narrowed 4.61 cents to 84.44 cents a gallon.

The EIA will probably report tomorrow that gasoline supplies declined 900,000 barrels in the week ended Nov. 8, according to the median estimate of 11 analysts in a survey by Bloomberg.

Demand for the motor fuel in the prior week jumped to the highest level since July. Ethanol is blended with gasoline to meet federal biofuel consumption mandates and stretch supply.

EPA Proposal

Blackford said traders are anticipating the release by the Environmental Protection Agency of next year’s proposed consumption targets.

The plan, which may be released this week, has been sent to the Office of Management and Budget for review. The agency has held more than 20 separate meetings with outside groups about the 2014 mandates since Sept. 23, according to its records.

Oil interests and biofuel industry advocates have argued about whether the government should maintain, lower or abolish the standard.

The EPA uses Renewable Identification Numbers, or RINs, tracking certificates attached to each gallon of ethanol to track compliance with the mandate.

Corn-based RINs decreased 5 cents to 21 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol tumbled 7 cents to 23 cents.

Corn for December delivery slipped 2.5 cents, or 0.6 percent, to $4.3225 a bushel in Chicago. One bushel of the grain makes at least 2.75 gallons of ethanol. The December crush spread of corn to ethanol was 17 cents, up from 13 cents yesterday.

In cash market trading, ethanol rose 17 cents to $2.20 a gallon in New York, 3.5 cents to $1.86 in Chicago, 1.5 cents to $1.95 on the Gulf Coast and 3 cents to $1.96 on the West Coast, data compiled by Bloomberg show.

West Coast ethanol’s premium to the Gulf was 1 cent, from a 0.5-cent deficit yesterday, while Chicago’s discount to New York widened 13.5 cents to 34 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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