Ethanol Strengthens Versus Gasoline After U.S. Stockpiles Drop
Ethanol’s discount to gasoline narrowed after U.S. inventories of the biofuel dropped.
The spread, or price difference, shrank 0.89 cents to 52.36 cents a gallon at 11:06 a.m. New York time, one day after the Energy Information Administration said stockpiles fell to the lowest level since December 2011. Ethanol inventories, which usually build this time of year, are on pace for the first drop in the January-March quarter since the government began tracking that data in June 2010.
“There is still some residual bullishness this morning remaining from yesterday’s big draw in the DOE stocks,” said Michael Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York.
Denatured ethanol for April delivery slipped 1.8 cents, or 0.7 percent, to $2.565 a gallon on the Chicago Board of Trade. Prices have risen 17 percent this year. The biofuel is up 0.8 percent this week and 6.7 percent this month.
Gasoline futures for April delivery dropped 2.69 cents, or 0.9 percent, to $3.0886 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
Breitenbach said traders are also positioning themselves before of the release of an Agriculture Department survey on farmers’ planting expectations, expected at noon in Washington.
Ethanol production has been battered in the wake of higher output costs because of drought in the Midwest that baked corn crops and sent prices for the grain to a record in August.
Corn for May delivery slumped 7.75 cents, or 1.1 percent, to $7.275 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
The corn crush spread, representing gains or losses from turning corn into ethanol and based on May contracts, was minus 10 cents a gallon, unchanged from yesterday. The spread was more than twice that at the beginning of the year.
The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.
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