Ethanol Narrows Discount to Gasoline on Stronger Exports

Ethanol climbed for a sixth day as demand from Asia to North America supported prices in the futures and cash markets.

Ethanol narrowed the discount to gasoline as exports to the Philippines jumped to 691,000 barrels this year through September, from none last year, while sales to Canada, the U.S.’s largest buyer, rose 12 percent in the same period, data from the Energy Information Administration show. Stockpiles are down 22 percent from a year earlier.

“The export market has been very strong,” Chris Wilson, an analyst at Atten Babler Risk Management LLC in Galena, Illinois, said in a telephone interview. “And you also have tight inventories that are being supportive at this moment.”

January-delivery denatured ethanol gained 2.4 cents, or 1.3 percent, to settle at $1.885 a gallon on the Chicago Board of Trade. The discount to gasoline narrowed to 82.77 cents from 85.82 cents yesterday.

Gasoline for January settlement declined 0.65 cent to $2.7127 a gallon. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

U.S. ethanol inventories were 15.1 million barrels on Nov. 29, according to the EIA. Production has exceeded 900,000 barrels a day for six weeks in a row after not reaching that level for more than a year.

Crush Spread

Corn for December delivery retreated 2.75 cents, or 0.6 percent, to $4.2275 a bushel in Chicago. The difference between December-delivery corn and the price of a gallon of ethanol for December, known as corn crush spread, was 94 cents today. The December ethanol contract expired yesterday. The March crush spread was 13 cents, up from 10 cents yesterday. One bushel of corn, the main ingredient used by distillers, makes at least 2.75 gallons of ethanol.

Corn-based Renewable Identification Numbers, or RINs, gained 5 cents to 35 cents a gallon. Advanced RINS fell 1 cent to 29 cents. RINs are certificates attached to each gallon of biofuels that are submitted to the government and can be traded among companies.

In cash markets, ethanol rose 35 cents to $3.45 a gallon in New York and 2.5 cents to $2.625 a gallon on the West Coast, according to data compiled by Bloomberg. The price fell 5.5 cents to $2.55 in Chicago and 4.5 cents to $2.65 on the Gulf Coast.

Chicago’s discount to New York widened 40.5 cents to 90 cents, while the West Coast’s discount to the Gulf tightened 7 cents to 2.5 cents.

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