Ethanol Advances Versus Gasoline on Signs of Increased Demand

Ethanol gained against gasoline on speculation demand for the biofuel will climb while stockpiles are at seasonal record lows.

The spread, or price difference, narrowed 0.52 cent to 29.14 cents a gallon New York time as the four-week average of gasoline demand has increased 6 percent from this year’s low in January, data from the Energy Information Administration show. Ethanol is blended with the motor fuel to meet federal mandates and stretch supply.

“Gasoline production should continue to ramp up, so that points to a little more demand,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Stockpiles are pretty low.”

Denatured ethanol for July delivery rose 0.5 cent to $2.446 a gallon on the Chicago Board of Trade. Prices are up 12 percent this year.

Gasoline for July delivery fell 0.02 cent to $2.7374 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-blended gasoline made up about 94 percent of the total U.S. gasoline pool in the week ended June 14, according to data from the EIA, the Energy Department’s analytical arm.

Fuel Output

Production of the biofuel fell 1.2 percent to 873,000 barrels a day, the first back-to-back weekly declines since March and down 3 percent from a year earlier.

Stockpiles of the fuel gained 2.9 percent to 16.5 million barrels, the EIA’s report showed. That’s down 22 percent from a year earlier.

Blackford said ethanol production may decline during the latter part of July and August as corn supply becomes tighter before this year’s harvest and plants perform routine maintenance.

Corn for July delivery climbed 3.5 cents to $6.5675 a bushel in Chicago. The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was 6 cents, unchanged from yesterday, data compiled by Bloomberg show.

The Energy Department is scheduled to release the latest production data tomorrow at 10:30 a.m. in Washington.

In cash market trading, ethanol sank 8 cents to $2.68 a gallon on the West Coast, rose 1 cent to $2.55 on the Gulf Coast, fell 0.5 cent to $2.46 in Chicago and declined 1 cent to $2.53 in New York, data compiled by Bloomberg show.

West Coast ethanol’s premium over the U.S. Gulf narrowed 9 cents to 13 cents, the lowest level since June 10. Chicago’s discount to New York Harbor tightened 0.5 cent to 7 cents.

Ethanol imports have averaged 19,000 barrels a day so far this year through June 14, EIA data show, up from 6,000 barrels a day from the same period a year ago.

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