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Ethanol’s Discount Narrows on Low Inventories, EPA Mandate

Ethanol futures advanced against gasoline on low inventories and after the U.S. Environmental Protection Agency said it hasn’t decided what to do about the renewable fuel mandate for 2014.

The spread narrowed 2.63 cents to 92.38 cents a gallon. Inventories sank to a record low of 15.4 million barrels in the week ended Oct. 4, while output declined to 868,000 barrels a day from 875,000 a week earlier, Energy Information Administration data show.

“After the EPA said no final decision has been made on the mandate, all the attention turned to low inventories,” Renato Dias, an analyst at Intl FCStone in Campinas, Brazil, said in a telephone interview.

Denatured ethanol for November delivery rose 2.5 cents, or 1.5 percent, to settle at $1.743 a gallon at the Chicago Board of Trade, the highest since Oct. 3. Futures have dropped 20 percent this year.

Gasoline for November delivery fell 0.13 cent to close at $2.6668 a gallon in the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

RINs, certificates attached to each gallon of biofuel that are submitted to the government and can be traded among companies, rose 2 cents to 32 cents a gallon, after sinking to a seven-month low on Oct. 11, according to data compiled by Bloomberg. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, were unchanged at 42 cents.

EIA Shutdown

Uncertainty about ethanol inventories will increase this week as the EIA has stopped operating because of the federal government shutdown, Dias said. There’s no schedule for the weekly report on output and stockpiles.

Ethanol trading volumes were down 44 percent from the 30-day average as U.S. banks were closed for Columbus Day.

Corn for December delivery rose 3.75 cents, or 0.9 percent, to $4.37 a bushel in Chicago. Prices fell five of the past six weeks. The December crush spread of corn to the biofuel was 5 cents a gallon, little changed from the previous session.

In cash market trading ethanol declined 1.5 cents to $2.055 a gallon in New York and gained 7 cents to $2.275 on the West Coast, according to data compiled by Bloomberg. The price was unchanged at $2.08 in Chicago and at $2.18 on the Gulf Coast.

New York’s premium to Chicago slipped to 22 cents, while the West Coast’s premium to the Gulf rose to 9.5 cents.

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