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Ethanol Weakens Versus Gasoline Sixth Day on Refinery Shutdowns

Jan. 29 (Bloomberg) -- Ethanol weakened a sixth day against gasoline as the motor fuel rose on speculation that refinery shutdowns will tighten supplies, while the biofuel was little changed because of a supply glut.

The spread widened 3.66 cents a day after Hess Corp. said it will shut the Port Reading, New Jersey, refinery at the end of February. Ethanol’s streak of losses versus gasoline is the longest since 2010.

“Production continues to idle back, but maybe it still needs to,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. Ethanol hasn’t tracked gasoline closely because of the oversupply, he said.

The grain-based additive was 56.84 cents cheaper than gasoline, based on prompt-month contracts, the widest gap since Jan. 8. Denatured ethanol for February delivery added 0.2 cent to $2.405 a gallon on the Chicago Board of Trade. Prices have advanced 9.8 percent this year.

Gasoline for February delivery rose 3.86 cents, or 1.3 percent, to $2.9734 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol.

Ethanol stockpiles totaled 20.1 million barrels as of Jan. 18, up 1.4 percent from a year earlier, the highest for this time of year since the U.S. Energy Information Administration began tracking weekly data in June 2010.

Corn Prices

Corn for March delivery gained 0.25 cent to $7.295 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on March contracts, producers are losing 23 cents on each gallon of the fuel, unchanged from yesterday, according to data compiled by Bloomberg. The figures exclude the revenue that can be made from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

White Energy Inc., a U.S. ethanol producer, said today that it idled a distillery in Plainview, Texas, because of high corn prices.

Demand for ethanol to be blended with gasoline hasn’t been robust enough to alleviate the glut and raise prices enough to where producers can absorb the higher corn costs.

Ethanol-blended gasoline made up about 88 percent of the total U.S. gasoline pool in the week ended Jan. 18, compared with 90 percent the previous week, an EIA report showed.

Companies have also faced higher competition from Brazilian grades of the fuel, which uses sugar cane as a feedstock.

Ethanol Imports

Imports of the biofuel jumped to 67,000 barrels a day in the week that ended Jan. 18 from 27,000 the previous week and none a year earlier.

Spot ethanol in Sao Paulo cost $2.13 a gallon in the week ended Jan. 25, data compiled by Bloomberg show, about 11 percent cheaper than today’s U.S. futures price.

In spot market trading, ethanol in New York harbor at $2.495 a gallon was 9 cents more than in Chicago, according to data compiled by Bloomberg. Ethanol on the Chicago spot market has traded at about an 8.4 cent discount to New York harbor in the past year.

Ethanol on the West Coast cost $2.595, the highest in the U.S., and 13.5 cents more expensive than in the U.S. Gulf. Gulf Coast ethanol yesterday traded at a 19 cent discount to the West Coast market, the steepest since July 23.

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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