Ethanol Steady Versus Gasoline on Stockpiles at 18-Month LowMario Parker
Ethanol was steady against gasoline following a government report that showed production at the smallest level in three weeks and stockpiles of the biofuel at an 18-month low.
The spread, or price difference, expanded 0.04 cent to 27.08 cents a gallon, after the Energy Information Administration said inventories dropped 1.1 percent to 16.8 million barrels, a second weekly decline and the lowest level since Nov. 4, 2011. Production slid to 843,000 barrels a day.
“I thought we’d get a stock build and it was a draw,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Production was a draw, and that was a surprise to me, too.”
Denatured ethanol for June delivery rose 2 cents, or 0.8 percent, to $2.583 a gallon on the Chicago Board of Trade. Futures have gained 17 percent in the past year.
Gasoline for June delivery advanced 2.04 cents, or 0.7 percent, to $2.8538 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Ethanol production is down 6 percent from a year earlier as the biofuel struggles to return to levels prior to last summer’s drought that devastated corn crops and cut returns on making the additive.
“We’ve gone through a period where production rates have been down and we’ve gotten stocks down to a point in some areas where they have to scramble,” Blackford said. “It takes a while to cycle through.”
Corn for July delivery declined 7 cents, or 1.1 percent, to $6.33 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
The corn crush spread for July was 17 cents a gallon, up from 13 cents yesterday. That compares with minus 35 cents on Dec. 31. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.
Ethanol-blended gasoline made up a record 97 percent of the total U.S. gasoline pool, up from 96 percent the previous week, the Energy Department’s statistical arm said.
For a second week, there were no U.S. imports.
Spot ethanol in Sao Paulo fetched $2.50 a gallon in the week ended May 3, down 3 percent from the previous week, data compiled by Bloomberg show.
In U.S. cash market trading, ethanol in Chicago fell 1.5 cent to $2.685 a gallon; in the U.S. Gulf the additive slipped 1 cent to $2.75; in New York prices gained 1 cent to $2.91; and on the West Coast the biofuel jumped 1 cent to $2.81, data compiled by Bloomberg show.
West Coast ethanol’s premium to the U.S. Gulf expanded 2 cents to 6 cents and Chicago’s discount to New York Harbor expanded 2.5 cents to 22.5 cents, the widest since Dec. 9, 2011.