Dec. 21 (Bloomberg) -- Ethanol rose for a fourth day in Chicago after a government report showed increased demand for the biofuel to be used in gasoline.
Futures extended the longest set of gains since November after the Energy Department said production of conventional gasoline blended with ethanol climbed 2.2 percent to 5.26 million barrels a day last week, the highest level since Aug. 12. Refiners get a 45-cent tax credit for every gallon of ethanol mixed into the motor fuel, an incentive that expires Dec. 31.
Ethanol, part of U.S. plans to reduce dependence on crude oil, is blended with gasoline to stretch supply. The report showed oil inventories fell 10.6 million barrels to 323.6 million, the largest decline since Feb. 16, 2001. Gasoline stockpiles dropped 412,000 barrels to 218.4 million.
Denatured ethanol for January delivery rose 1.7 cents, or 0.8 percent, to settle at $2.157 a gallon on the Chicago Board of Trade. Futures have fallen 9.3 percent this year and are headed for the first yearly decline since 2008.
In cash market trading, ethanol on the West Coast sank 11 cents, or 4.8 percent, to $2.205 a gallon and in New York the additive decreased 2.5 cents, or 1.1 percent, to $2.275, according to data compiled by Bloomberg.
Ethanol in Chicago declined 0.5 cent to $2.20 a gallon and the fuel was unchanged in the U.S. Gulf at $2.325.
Crude oil for February delivery increased $1.43, or 1.5 percent, to settle at $98.67 a barrel on the New York Mercantile Exchange.
Gasoline for January delivery jumped 4.12 cents, or 1.6 percent, to $2.6199 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
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