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Ethanol Slips on Speculation That Output Will Increase

Jan. 31 (Bloomberg) -- Ethanol futures dropped from a two-week high on speculation that the gains will encourage companies to boost production.

Prices declined after advancing 3.4 percent yesterday, the most in three weeks. An Energy Information Administration report this week showed both production and supply of the additive slumped in the seven days ended Jan. 24.

“It had a nice run yesterday,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “As soon as it gets to a certain level, people start hammering it. Once they see that price, everybody and their brother comes out of the woodwork and says, ‘Hey, we’ve got ethanol to sell.’”

Denatured ethanol for February delivery decreased 0.6 cent to $1.885 a gallon on the Chicago Board of Trade. Prices have fallen 23 percent in the past year.

Gasoline for February delivery slid 3.54 cents, or 1.3 percent, to $2.6272 a gallon on the New York Mercantile Exchange. The futures cover reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol’s discount to gasoline narrowed 2.94 cents to 74.22 cents a gallon.

Corn for March delivery gained 0.5 cent to $4.34 a bushel in Chicago. The corn crush spread, or the price difference between a bushel of corn and a gallon of ethanol, was 24 cents, unchanged from yesterday.

Ethanol production slid 0.6 percent to 900,000 barrels a day in the week ended Jan. 24 and stockpiles declined 0.5 percent to 16.9 million barrels, data from the Energy Department’s statistical arm show.

In cash market trading, ethanol fell 7 cents to $1.85 a gallon in Chicago, 6 cents to $2.04 on the Gulf Coast and 1.5 cents to $2.135 in New York, data compiled by Bloomberg show. On the West Coast, prices held at $2.17 a gallon.

New York’s premium to Chicago expanded by 5.5 cents to 28.5 cents, while the Gulf’s discount to the West Coast widened 6 cents to 13 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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