Ethanol Climbs Against Gasoline on Stockpiles and Record RINs

Ethanol gained for a second day against gasoline on concern that the U.S. will struggle to replenish stockpiles of the biofuel. The value of Renewable Identification Numbers reached a record high.

The spread, or price difference, tightened 3.46 cents to 57.73 cents a gallon. A July 10 government report showed inventories in the Midwest are down 18 percent from a year earlier. RINs for corn-based ethanol surged to $1.35 today from 7 cents in January while advanced varieties, which cover biodiesel and Brazilian sugarcane-based biofuel jumped to $1.36 from 37 cents in January.

“On the ethanol side, all they’re talking about is how tight stocks are in Chicago,” said Mike Blackford, a consultant at INTL FCStone in Des Moines, Iowa. “Plus, RINs are firm.”

Denatured ethanol for August delivery increased 6.6 cents, or 2.7 percent, to $2.557 a gallon on the Chicago Board of Trade. Prices have gained 17 percent this year.

Gasoline for August delivery gained 3.14 cents, or 1 percent, to $3.1343 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

The oil industry and ethanol companies are arguing about whether the U.S. should maintain consumption targets. The Senate Committee on Energy and Natural Resources held a meeting today on gasoline and fuel prices.

House Hearings

The House Energy and Commerce Committee plans hearings on the Renewable Fuels Standard on July 23 and July 24, a spokeswoman said yesterday. The measure requires refiners to use 13.8 billion gallons of ethanol this year.

RINs, certificates attached to each gallon of biofuel, are used to track compliance with the mandate.

Ethanol is made from corn in the U.S. Last summer’s drought wilted crops and eroded returns to make the biofuel.

Production of ethanol averaged 881,000 barrels a day in the week ended July 5, data from the Energy Information Administration show, down 8.5 percent from the record in December 2011.

Corn for September delivery advanced 9 cents, or 1.7 percent, to $5.4525 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, based on September contracts for the grain and biofuel, was 39 cents, up from 38 cents yesterday, data compiled by Bloomberg show.

Attracting Imports

Seasonally above-average ethanol prices have attracted increased imports of the fuel, data from the Energy Department’s research unit show. Foreign purchases of ethanol averaged 25,000 barrels a day in the week ended July 5, up 39 percent from the same period a year earlier, the EIA said in the July 10 report.

In cash market trading, ethanol in New York advanced 3.5 cents to $2.72 a gallon; in Chicago the fuel climbed 2 cents to $2.62; in the U.S. Gulf prices rose 2 cents to $2.695; and on the West Coast the additive jumped 1 cent to $2.685 a gallon, data compiled by Bloomberg show.

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