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Ethanol’s Discount to Gasoline Widens as Hess Announces Shutdown

Jan. 28 (Bloomberg) -- Ethanol’s discount to gasoline widened for a fifth day as oversupply kept the additive from keeping pace with a rally for the motor fuel.

The spread widened 3.24 cents after Hess Corp. said it will shut the Port Reading, New Jersey, refinery at the end of February and sell its terminal business.

Gains for gasoline futures “seemed to be driven by the announcement of Hess Corp.’s exit from the refinery business,” said Michael Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York. “Ethanol was left in the dust.”

The grain-based additive was 53.18 cents cheaper than gasoline, based on prompt-month contracts for both commodities, the widest since Jan. 10. The spread was 49.94 cents Jan. 25.

Denatured ethanol for February delivery advanced 2.7 cents, or 1.1 percent, to $2.403 a gallon on the Chicago Board of Trade, the highest level since Dec. 6. Prices have risen 9.7 percent this year.

Stockpiles of the fuel in the week ended Jan. 18 were 20 million barrels, up 1.4 percent from a year earlier, an Energy Information Administration report showed, the highest for this time of year since the Energy Department’s statistical agency began tracking weekly data for ethanol in June 2010.

Ethanol producers have sought to deal with the glut and higher corn prices by reducing output.

Poet LLC, the second-biggest U.S. ethanol maker, said Jan. 25 that it will idle a plant in Macon, Missouri, on Feb. 1, because there isn’t enough corn available.

Inventories ‘Heavy’

“Despite the recent ethanol plant shutdowns, inventories still remain slightly heavy,” Breitenbach said.

Corn for March delivery jumped 8.5 cents, or 1.2 percent, to $7.2925 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Gasoline for February delivery rose 5.94 cents, or 2.1 percent, to $2.9348 a gallon on the New York Mercantile Exchange.

In cash market trading, ethanol in New York added 2.5 cents, or 1 percent, to $2.495 a gallon and on the West Coast the additive increased 2 cents to $2.59, data compiled by Bloomberg show.

Ethanol in Chicago climbed 1.5 cents to $2.385 a gallon and on the Gulf Coast the biofuel slipped 2 cents to $2.40.

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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