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Ethanol Narrows Gap to Gasoline as Output Fails to Lift Supplies

Ethanol rose against gasoline on concern that production of the additive hasn’t increased enough to refill stockpiles that are at record seasonal lows.

The biofuel’s discount narrowed 4.7 cents to 92.06 cents a gallon. Output of ethanol jumped 5.2 percent to 875,000 barrels a day last week, while inventories sank for a third week to 15.5 million barrels, 0.4 percent higher than the all-time low on June 28, Energy Information Administration data show.

“The inventory story has some whiskers,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “The market’s waiting for that first big pop in stocks to show up.”

Denatured ethanol for November delivery advanced 1.5 cents, or 0.9 percent, to $1.687 a gallon on the Chicago Board of Trade.

Gasoline for November delivery fell 3.2 cents, or 1.2 percent, to $2.6076 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

The additive is made mostly from corn in the U.S. The harvest for the grain is under way, and about 12 percent was collected as of Sept. 27, up from 7 percent the previous week, data from the U.S. Agriculture Department show.

Kitt said he expects ethanol prices to slide as more corn becomes available and companies boost output.

“The die is kind of cast here,” he said.

Corn Prices

Corn for December delivery gained 4 cents to $4.4325 a bushel in Chicago. The December corn crush spread of corn to ethanol was break-even, unchanged from yesterday.

The U.S. monitors compliance with the law requiring ethanol use through Renewable Identification Numbers, or RINs, tracking certificates that are attached to each gallon of biofuel and that can be traded among refiners.

Conventional ethanol RINs gained 1 cent to 39 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, rose 2 cents to 50 cents, according to data compiled by Bloomberg.

Ethanol imports plunged 71 percent to 14,000 barrels a day in the week ended Sept. 27, EIA data show.

In cash market trading, ethanol jumped 10 cents to $2.20 a gallon in New York, 5.5 cents to $2.125 on the Gulf Coast and 5 cents to $2.05 in Chicago, data compiled by Bloomberg show. On the West Coast, the biofuel declined 2.5 cents to $2.025 a gallon.

New York’s premium to Chicago expanded 5 cents to 15 cents, while the West Coast’s discount to the Gulf widened 8 cents to 10 cents.

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