Ethanol Rises Above $3 a Gallon for First Time Since 2011

Ethanol futures rose above $3 for the first time since 2011 amid demand from refineries and blenders before U.S. gasoline use rises with warmer weather.

Distillers are facing delays transporting the ethanol they produce to markets after winter storms slowed deliveries and competition for rail cars forced ethanol plants to slow production. A 2007 U.S. law requires the biofuel, mostly made from corn, to be blended into gasoline, so higher ethanol costs can boost prices at the pump. Inventories last week were down 10 percent from a year earlier, according to government data.

“We’re moving into the driving season, and refineries want more ethanol than they’re able to get,” Chris Wilson, an analyst at Atten Babler Risk Management LLC in Galena, Illinois, said in a telephone interview. “Also, logistics continue to be a big component.”

Denatured ethanol for April delivery gained 7.3 cents, or 2.5 percent, to settle at $3.017 a gallon on the Chicago Board of Trade, the highest close since July 27, 2011.

Ethanol production slipped to 885,000 barrels a day last week from 944,000 in the first week of December, according to Energy Information Administration data. Refinery and blender inputs, a measure of consumption, advanced 1.4 percent last week to 857,000 barrels of ethanol a day, the highest level since Dec. 20.

Demand is rising as distillers prepare to shut down for maintenance. Flint Hills Resources LLC, which owns and operates oil refineries and ethanol plants in the U.S., plans to close its Iowa Falls, Iowa, ethanol plant from March 31 through April 11, its website shows. Plymouth Energy LLC will shut down its Merrill, Iowa, plant on April 1 and April 2 and possibly April 3, according to its website.

Ethanol Premium

Ethanol, which has traded at a discount to gasoline for the past two years, switched to a premium this week. The biofuel’s premium expanded to 7.44 cents a gallon today from 3.51 cents yesterday, based on April futures settlement prices.

Gasoline for April delivery advanced 1.2 percent to $2.9426 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations. In the U.S., most gasoline is sold in a formula of 10 percent ethanol to the rest of the motor fuel, a mix known as E-10.

In cash trading, ethanol gained 8 cents to $3.98 a gallon in New York, and 6 cents to $3.40 in Chicago, data compiled by Bloomberg show. The biofuel declined 5 cents to $3.915 on the West Coast and was unchanged at $3.605 a gallon on the Gulf Coast.

To contact the reporter on this story: Lucia Kassai in Houston at lkassai@bloomberg.net

To contact the editors responsible for this story: Dan Stets at dstets@bloomberg.net Margot Habiby, Bill Banker

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