Ethanol’s Discount to Gasoline Expands to Widest in Three Months

Ethanol’s discount to gasoline expanded to the widest differential in three months on speculation that above-average seasonal prices will attract imports and help replenish stockpiles.

The spread, or price difference, gained 13.36 cents to 50.48 cents a gallon. Ethanol imports have averaged 19,000 barrels a day this year, up from 8,000 a year earlier, the Energy Information Administration said July 3. Stockpiles last week declined 5.2 percent to 15.4 million barrels, the lowest in records going back three years.

“Ethanol spreads continue to be well-bid on Wednesday’s DOE stock draw, but traders are expecting substantial imports on the next report,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York.

Denatured ethanol for August delivery rose 3.2 cents, or 1.4 percent, to $2.392 a gallon on the Chicago Board of Trade. Prices have gained 9.2 percent in 2013 and are above the five-year average for this time of year, data compiled by Bloomberg show. The July contract expired at $2.467 on July 3.

Gasoline for August delivery advanced 5.86 cents, or 2.1 percent, to $2.8968 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 fell 2.5 percent to 863,000 barrels a day in the week ended June 28, the EIA, the Energy Department’s research arm, said. That’s down 10 percent from the record 963,000 barrels a day in December 2011.

Corn Prices

Corn for July delivery climbed 6.5 cents, or 1 percent, to $6.8475 a bushel in Chicago. The more actively-traded December corn contract fell 11.5 cents to $4.9125 a bushel.

The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was minus 2 cents based on July futures, down from break-even on July 3 and compared with minus 35 cents on Dec. 31, data compiled by Bloomberg show.

The U.S. tracks compliance with government mandates for ethanol blending with Renewable Identification Numbers, or RINs, certificates attached to each gallon of the biofuel. Refiners can submit the credits or trade them.

Corn-based ethanol RINs rose 2 cents to $1.02, data compiled by Bloomberg show, while advanced RINs, which cover biodiesel or Brazilian sugarcane-based ethanol, were unchanged at $1.08.

In cash market trading, ethanol gained 5.5 cents to $2.44 a gallon in Chicago, 4.5 cents to $2.505 in New York, 2 cents to $2.63 on the West Coast and 1.5 cents to $2.47 on the Gulf Coast, data compiled by Bloomberg show.

West Coast ethanol’s premium to the U.S. Gulf widened 0.5 cent to 16 cents, the largest differential since June 24, while Chicago’s discount to New York Harbor narrowed 1 cent to 6.5 cents.

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