Ethanol Discount Narrows as Supplies Tighten Amid Higher Exports

Ethanol prices rose to a 12-week high, shrinking the biofuel’s discount to gasoline, amid strong export demand and concern that domestic supplies will tighten.

The spread narrowed 5.02 cents to 63.41 cents a gallon after exports jumped to an eight-month high and inventories declined for a third week, to 15.02 million barrels as of Nov. 22. Stockpiles slumped 26 percent this year while output advanced 15 percent, data from the Energy Information Administration show.

“There is demand in the domestic and export market and you can see that is reflected in the inverted price curve,” Renan Pimenta, an analyst at Intl FCStone Inc. based in Campinas, Brazil, said in a telephone interview. “That’s not something you see often.”

Denatured ethanol for December delivery rose 3.6 cents, or 1.8 percent, to close at $2.05 a gallon on the Chicago Board of Trade, the highest settlement since Sept. 5.

December-delivery gasoline slid 1.42 cents to settle at $2.6841 on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol exports reached 1.29 million barrels in September, the most since January, the latest data from the Energy Information Administration show. Canada was the biggest buyer, with 706,000 barrels.

Markets reopened today after the Thanksgiving holiday in the U.S. Trading volume was 91 percent below the 100-day average and markets closed an hour earlier than usual.

Corn Prices

Corn for December delivery declined 2 cents, or 0.5 percent, to $4.1525 a bushel in Chicago. The crop is forecast to be a record 13.989 billion bushels, the U.S. Department of Agriculture said Nov. 8. The December crush spread of corn to ethanol was 54 cents, up from 49 cents Nov. 27.

Ethanol fell in major cash markets. The biofuel retreated 2.5 cents to $2.75 a gallon in New York, 2.5 cents to $2.675 in Chicago, 5 cents to $2.60 on the Gulf Coast and 2.5 cents to $2.725 on the West Coast, data compiled by Bloomberg show.

Chicago traded unchanged at a 7.5-cent discount to New York, while the West Coast’s premium to the Gulf expanded 2.5 cents 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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