Ethanol’s Discount to Gasoline Widens as Corn Prices Fall
Ethanol weakened against gasoline as corn prices declined for a fourth day and production of the biofuel rose.
The spread widened 1.63 cents a gallon to 61.07 cents based on settlement prices, data compiled by Bloomberg show. Production rose 0.5 percent to 774,000 barrels a day in the week ended Feb. 1, the Energy Information Administration said today. Corn futures declined for a fourth consecutive day.
“The big driver today was the corn market being off again,” said Chris Wilson, an analyst at Atten Babler Risk Management LLC in Galena, Illinois.
Denatured ethanol for March delivery fell 1.4 cents, or 0.6 percent, to $2.429 a gallon on the Chicago Board of Trade. Gasoline for March delivery rose 0.23 cent to $3.0397 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline made to be blended with the biofuel.
Corn for March delivery fell 6.5 cents, or 0.9 percent, to $7.225 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
The corn crush spread, or the profit that can be made from turning a bushel of corn into ethanol, was little changed at minus 20 cents, according to data compiled by Bloomberg.
Output of the biofuel rebounded last week from the lowest level since the Energy Department’s analytical arm began tracking weekly data in June 2010. U.S. imports of ethanol were 9,000 barrels a day for the second straight week, the EIA said.
Producers have had to contend with imports from Brazil, where the additive is made from sugarcane. Spot ethanol in Sao Paulo cost $2.21 a gallon in the week ended Feb. 1, data compiled by Bloomberg show, or 9.2 percent less than today’s U.S. futures price.
Ethanol fell in all spot market regions. The biofuel slid 3 cents to $2.41 in Chicago, 3 cents to $2.52 in New York, 3 cents to $2.575 on the West Coast, and 3.5 cents to $2.455 in the U.S. Gulf, according to data compiled by Bloomberg.
Ethanol-blended gasoline made up 89 percent of the total U.S. gasoline pool last week, up from 87 percent the previous week. Stockpiles of ethanol fell 2.2 percent to 20.1 million barrels last week, the government report showed. The surplus was 4.6 percent lower than a year ago, according to data compiled by Bloomberg.
“We’re still in an oversupply situation, but when you see stocks fall, it’s a positive trend toward usage,” said Jason Ward, an analyst at Northstar Commodity Investment Inc. in Minneapolis. “It should show the marketplace that demand for ethanol is improving.”
Under a 2007 energy law, U.S. refiners are to use 13.8 billion gallons of renewable fuels, such as ethanol, this year and 15 billion by 2015.
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