Ethanol Slips Against Gasoline as Stockpiles Rise Most This Year

Ethanol tumbled against gasoline after a government report showed stockpiles of the biofuel climbed the most in eight months and demand dropped. Renewable Identification Numbers surged to a record.

The spread, or price difference, widened 0.68 cent to 58.41 cents a gallon based on settlement prices, the first expansion since July 12. The Energy Information Administration said inventories jumped 5.5 percent to 16.6 million barrels and ethanol as a blending input at refineries tumbled 7.6 percent to 828,000 barrels a day.

“Traders are digesting the large build, but an even bigger decrease in blending,” said Justin Dirico, manager of the biofuels desk at Eagle Energy Brokers LLC in New York.

Denatured ethanol for August delivery fell 3.1 cents, or 1.2 percent, to $2.526 a gallon on the Chicago Board of Trade. Prices have gained 15 percent this year.

Gasoline for August delivery slipped 2.42 cents, or 0.8 percent, to $3.1101 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 sank 0.6 percent to 876,000 barrels a day in the week ended July 12, data from the Energy Department’s research division shows. Output has ranged from 857,000 to 875,000 for the past 10 weeks.

Imports doubled to 50,000 barrels a day from the previous week. Dirico said traders expected an increase.

Crush Spread

Corn for September delivery decreased 6.75 cents, or 1.2 percent, to $5.385 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, unchanged from yesterday, data compiled by Bloomberg show.

A 2007 energy law requires the U.S. to use escalating amounts of ethanol in gasoline. The country uses tracking certificates, known as Renewable Identification Numbers, or RINs, to maintain compliance.

Corn-based ethanol RINs rose 8 cents to a record $1.43, data compiled by Bloomberg show. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, increased 8 cents to a record of $1.44.

In cash market trading, ethanol fell 6 cents to $2.66 a gallon in New York, 3 cents to $2.59 in Chicago, 4.5 cents to $2.65 on the Gulf Coast and 0.5 cent to $2.68 on the West Coast.

West Coast ethanol strengthened 4 cents against the Gulf Coast to a 3-cent premium. Chicago traded 7 cents below New York Harbor versus 10 cents yesterday.

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