Ethanol strengthened against gasoline after a Hess Corp. refinery startup up in New Jersey added to regional supplies and sent motor-fuel prices lower.
The grain-based additive’s discount to gasoline narrowed to 35.34 cents a gallon from 35.9 cents yesterday, based on December futures prices. The difference has averaged 62.82 cents this year and reached 99.8 cents on Sept. 28. Gasoline also fell after Colonial Pipeline Co. returned service to its main gasoline line from the Gulf Coast to North Carolina. Ethanol was buoyed by a drop in corn, the fuel’s feedstock in the U.S.
“Ethanol’s actually holding up pretty well today, all things being considered,” said Chris Wilson, an analyst at Atten Babler Risk Management LLC in Galena, Illinois. “It’s still a tough margin environment.”
Denatured ethanol for December delivery slipped 2 cents, or 0.8 percent, to settle at $2.408 a gallon on the Chicago Board of Trade. The futures dropped 1.1 percent in November.
In cash market trading, ethanol on the West Coast fell 2 cents, or 0.8 percent, to $2.575 a gallon and in Chicago the additive lost 2 cents, or 0.8 percent, to $2.425, data compiled by Bloomberg show.
Ethanol in the U.S. Gulf declined 1.5 cents, or 0.6 percent, to $2.485 a gallon and in New York the biofuel slipped 1.5 cents, or 0.6 percent, to $2.52.
Gasoline for December delivery fell 2.56 cents, or 0.9 percent, to $2.7614 a gallon on the New York Mercantile Exchange. The contract, which expired today, covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Corn for March delivery fell 6 cents, or 0.8 percent, to $7.5275 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol. Corn rose to a record $8.49 on Aug. 10.
Based on December contracts for corn and ethanol, producers are losing 31 cents on each gallon of the fuel made, down from 30 cents yesterday, excluding the revenue that can be pocketed from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock, according to data collected by Bloomberg.
“It’s just a slow bleed,” Wilson said. “It’s just that fine line on how long can guys go with negative margins before shutting down.”
He said ethanol in the U.S. has also been pressured by a lack of export demand because higher corn prices make it less competitive on the global market.
Ethanol on the Brazilian spot market is fetching $2.04 a gallon, data compiled by Bloomberg show.
The fuel is derived from sugarcane in Brazil, giving that country a competitive edge over U.S. manufacturers, Wilson said.