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Ethanol Rebounds From 20-Month Low as Price Stimulates Demand

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June 4 (Bloomberg) -- Ethanol futures rebounded from the lowest level in 20 months on speculation that cheaper prices will spur demand.

Prices rose the most since May 16 after its two worst weeks this year, giving blenders an incentive to use more of the fuel. Ethanol in the U.S. is made from corn and mixed with gasoline to augment supply and meet federal mandates.

“Anytime you get a 1 in front of ethanol prices, it gets people to salivating and they want to get some,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “Prices got pretty darn cheap. We finally got a print under $2, which started a relief rally.”

Denatured ethanol for June delivery climbed 3.5 cents, or 1.8 percent, to settle at $2.01 a gallon on the Chicago Board of Trade. Prices rebounded from $1.975 on June 1, the lowest price since Oct. 6, 2010. Futures have fallen 8.8 percent this year.

In cash market trading, ethanol on the West Coast dropped 4 cents, or 1.8 percent, to $2.195 a gallon and in New York the additive decreased 2.5 cents, or 1.2 percent, to $2.055, according to data compiled by Bloomberg.

Ethanol in Chicago fell 2 cents, or 1 percent, to $1.98 a gallon and in the U.S. Gulf, the fuel slid 2 cents, or 1 percent, to $2.055.

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

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