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Ethanol’s Discount to Gasoline Narrows on U.S. Budget Stalemate

Dec. 13 (Bloomberg) -- Ethanol’s discount to gasoline narrowed on concern that U.S. budget talks are stalled.

A decline for the biofuel was outpaced by a drop in gasoline after House Speaker John Boehner said the White House isn’t serious about cutting spending. His comment came a day after the Energy Department said gasoline inventories rose as refiners operated at the highest seasonal rates since 2004. Ethanol supplies jumped to the highest level since June.

“Even taking into account the decrease in production, the DOE inventory numbers definitely indicate an overabundance of ethanol supplies at the moment,” said Mike Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York.

Ethanol’s discount to gasoline narrowed to 31.21 cents a gallon from 32.65 cents yesterday, based on futures settlement prices. The differential has averaged 61.57 cents this year.

Denatured ethanol for January delivery fell 3 cents, or 1.3 percent, to $2.29 a gallon on the Chicago Board of Trade, the lowest price since Sept. 27. Prices dropped for a sixth day, the longest streak of losses since July 26. The futures have climbed 4 percent this year.

In cash market trading, ethanol on the West Coast slid 5.5 cents, or 2.2 percent, to $2.415 a gallon and in the U.S. Gulf the additive declined 2.5 cents, or 1.1 percent, to $2.36, data compiled by Bloomberg show.

Ethanol in Chicago decreased 4 cents, or 1.7 percent, to $2.29 a gallon and in New York the biofuel lost 2.5 cents, or 1 percent, to $2.395.

Gasoline Drops

Gasoline for January delivery slumped 4.44 cents, or 1.7 percent, to settle at $2.6021 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery fell 5.25 cents, or 0.7 percent, to $7.2025 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts for corn and ethanol, producers are losing 31 cents on each gallon of the fuel made, up 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.

The value of Renewable Identification Numbers, known as RINs, tumbled 15 percent to 4.76 cents, data compiled by Bloomberg show. RINs are credits that help the government track whether refiners are meeting 2012 federal ethanol use mandates.

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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