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Ethanol Rises Against Gasoline on Speculation for Demand Boost

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Sept. 16 (Bloomberg) -- Ethanol rose against gasoline on speculation that a 25 percent price drop this month will lift demand for the biofuel.

The spread, or price difference, narrowed 6.2 cents to 93.36 cents a gallon, tightening from the widest level since September 2012, as futures rebounded from a three-year low and as gasoline slumped on signs the U.S. won’t strike Syria.

“It has been beat up enough that you’ll probably get a bump here,” said Mike Blackford, a consultant at Intl FCStone in Des Moines, Iowa.

Denatured ethanol for October delivery rose 0.9 cents, or 0.5 percent, to $1.783 a gallon on the Chicago Board of Trade, climbing from the lowest level since August 2010. Futures have dropped 19 percent this year.

Gasoline for October delivery sank 5.3 cents, or 1.9 percent, to $2.7166 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Blackford said ethanol’s discount to the motor fuel gives incentive for blenders to use as much of the additive as they can to capture the price difference.

Ethanol is made primarily from corn in the U.S. The harvest is usually from September to November.

Corn for December delivery fell 0.5 percent to $4.565 a bushel in Chicago. The December crush spread of corn to ethanol was minus 5 cents a gallon.

Increased supply of the grain will help lift output of the fuel, Blackford said.

Fuel Production

Ethanol production in the week ended Sept. 6 rose 3.5 percent to 848,000 barrels a day, 12 percent lower than the record 963,000 barrels a day in December 2011, data from the Energy Information Administration show.

Stockpiles were at 16.3 million barrels, down 14 percent from a year earlier, according to the EIA, the Energy Department’s analytical arm. Imports tumbled 59 percent to 15,000 barrels a day.

Tracking certificates called Renewable Identification Numbers, or RINs, are attached to each gallon of biofuel to help the U.S. and refiners track compliance with federal consumption targets.

Corn-based ethanol RINs fell 3 cents to 57 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, dropped 4 cents to 65 cents, data compiled by Bloomberg show. The prices are the lowest since February.

In cash market trading, ethanol plunged 58 cents to $2.12 a gallon on the Gulf Coast, 49.5 cents to $2.125 on the West Coast, 48.5 cents to $2.10 in New York and 27.5 cents to $2.035 in Chicago, data compiled by Bloomberg showed.

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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