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Ethanol’s Discount to Gasoline Narrows on Stockpile Withdrawals

May 22 (Bloomberg) -- Ethanol’s discount to gasoline shrank to the smallest in six days after a report showed a fourth week of supply declines.

The spread, or price difference, narrowed 4.04 cents to 17.34 cents a gallon after the Energy Information Administration said that stockpiles sank 1.5 percent to 16.2 million barrels, the fewest since Nov. 5, 2010. Most of the declines were in the population-dense regions of the East Coast, Midwest and Gulf of Mexico, classified as PADDs 1, 2 and 3.

“The tight ethanol inventory situation was clearly on display in this week’s EIA report,” said Michael Breitenbach, a broker and director of research at Blue Ocean Brokerage LLC in New York. “Stocks in PADDs 1, 2 and 3 all now stand at or near 2013 lows.”

Denatured ethanol for June delivery rose 1.4 cent, or 0.5 percent, to $2.646 a gallon on the Chicago Board of Trade. Futures have gained 24 percent in the past year.

Gasoline for June delivery slipped 2.64 cents, or 0.9 percent, to $2.8194 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol-blended gasoline made up about 94 percent of the total U.S. gasoline supply, down from 95 percent the previous week and the smallest amount since April 19, EIA data show.

Production of the biofuel climbed 2.1 percent to 875,000 barrels a day last week, the highest level since June 22, the Energy Department’s statistical arm said.

Corn Costs

Manufacturing costs have eased amid projections that farmers will plant the most acres of corn since 1936 as they seek to rebound from drought that shriveled crops last summer.

Corn for July delivery jumped 18.5 cents, or 2.9 percent, to $6.585 a bushel in Chicago.

The corn crush spread for July was 12 cents, down from 17 cents yesterday and compared with minus 35 cents on Dec. 31. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

Corn-based ethanol Renewable Identification Numbers for 2013, or RINs, fell 0.6 percent to 89 cents as of 4:05 p.m. New York time, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, gained 2.1 percent to 99 cents.

The U.S. hasn’t made any foreign purchases of the biofuel since April 19, the longest such stretch since the period ended March 2, 2012, the EIA report showed.

Anhydrous ethanol in Sao Paulo cost $2.53 a gallon in the week ended May 17, or about 7 percent cheaper than today’s spot price in the U.S. Gulf, data compiled by Bloomberg show.

Spot Prices

In cash market trading, ethanol in the U.S. Gulf sank 4 cents to $2.72 a gallon, data compiled by Bloomberg show. In Chicago, the additive lost 1.5 cents to $2.625. In New York, it was unchanged at $2.76, and on the West Coast the biofuel was unchanged at $2.785 a gallon.

West Coast ethanol’s premium over the Gulf Coast expanded 4 cents to 6.5 cents, while Chicago’s discount to New York Harbor widened 1.5 cents to 13.5 cents.

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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