Ethanol Gains After Stockpiles Drop Amid Lower Output

Ethanol advanced after stockpiles of the biofuel fell for the first time in five weeks.

February futures rose as much as 1.9 percent. U.S. inventories declined 0.5 percent to 15.6 million barrels in the week ended Dec. 27, the Energy Information Administration said today. Production retreated 1.4 percent to 913,000 barrels a day, the 10th straight week over 900,000. Cold weather in the Midwest hampered transportation of the fuel.

“Demand is still surprisingly strong,” said Renan Pimenta, an analyst for Intl FCStone Inc. in Campinas, Brazil. “The snow has also been a problem to move the ethanol to consumers.”

Denatured ethanol for February delivery gained 3.1 cents to $1.85 a gallon on the Chicago Board of Trade. The January contract, which expires Jan. 6, added 5 cents to $2 a gallon.

Ethanol’s discount to gasoline was 81.33 cents based on February contracts, down from 87.6 cents yesterday.

Gasoline for February delivery declined 3.17 cents, or 1.2 percent, to $2.6633 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 production is forecast to average 900,000 barrels a day this year, the EIA said in its Dec. 10 Short-Term Energy Outlook. The average for 2013 was 855,000, EIA data show.

Corn for March delivery fell 3 cents, or 0.7 percent, to $4.175 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, or the difference between the cost of corn and the price of ethanol, was 27 cents a gallon based on March contracts, up from 23.5 cents yesterday.

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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