Ethanol strengthened against gasoline on speculation that falling stockpiles will help reduce a glut of the biofuel and buoy prices.
The spread narrowed 1.88 cents to 59.19 cents a gallon as gasoline slipped more than ethanol, data compiled by Bloomberg show. Stockpiles of the biofuel fell 2.2 percent to 20.1 million barrels, the biggest drop in six weeks, the Energy Information Administration, the Energy Department’s statistical arm, said yesterday.
“By mid-first quarter we tend to see the prices narrow,” said Terry Reilly, senior commodity analyst at Futures International LLC in Chicago. “The tighter stocks in ethanol will rally futures for the next three months.”
Denatured ethanol for March delivery fell 2.1 cents, or 0.9 percent, to settle at $2.408 a gallon on the Chicago Board of Trade. Gasoline for March delivery fell 3.98 cents, or 1.3 percent, to $2.9999 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline made to be blended with the biofuel.
Stockpiles of ethanol in the week ended Feb. 1 were 4.6 percent lower than a year ago, government data showed. Ethanol-blended gasoline made up 89 percent of the total U.S. gasoline pool last week, up from 87 percent the previous week.
The value of Renewable Identification Numbers, or RINs, rose 2 percent to 51 cents for advanced forms of ethanol, data compiled by Bloomberg show. Each gallon of ethanol is assigned a RIN, which helps the government track whether refiners are meeting 2012 federal ethanol use mandates.
“Ethanol and RINs should move in tandem,” Reilly said.
U.S. refiners are to use 13.8 billion gallons of renewable fuels, such as ethanol, this year and 15 billion by 2015.
Corn for March delivery declined for a fifth day, falling 11.75 cents, or 1.6 percent, to $7.1075 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
The corn crush spread, or the profit that can be made from turning a bushel of corn into ethanol, narrowed to minus 18 cents from minus 20 cents the previous day, according to data compiled by Bloomberg.
In cash market trading, ethanol slid 0.5 cent to $2.405 a gallon in Chicago, 1 cent to $2.51 in New York and 1.5 cents to $2.56 on the West Coast, according to data compiled by Bloomberg. Spot ethanol fell 2 cents to $2.435 in the U.S. Gulf, a third daily drop.
Spot ethanol in Sao Paulo, where ethanol is made from sugarcane, cost $2.21 a gallon in the week ended Feb. 1, data compiled by Bloomberg show, or 8.3 percent less than today’s U.S. futures price.