Ethanol Jumps Versus Gasoline as Output Slips to Three-Month Low

Ethanol strengthened against gasoline after the U.S. government reported production of the biofuel reached a three-month low last week.

The discount to gasoline narrowed 3.33 cents to 75.02 cents a gallon at 12:17 p.m. New York time as the Energy Information Administration said output fell 2.5 percent to 832,000 barrels a day, the lowest level since April 12, and imports tumbled 68 percent to 13,000 barrels a day.

“The industry has cut back on production dramatically over the past few weeks,” said Michael Breitenbach, a broker and director of research at Blue Ocean Brokerage LLC in New York. “Imports have been arriving at a slower pace than earlier in the summer.”

Denatured ethanol for August delivery rose 5.9 cents, or 2.6 percent, to $2.294 a gallon on the Chicago Board of Trade. Prices have climbed 4.8 percent this year.

Gasoline for August delivery increased 2.57 cents, or 0.9 percent, to $3.0442 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Stockpiles of the additive plunged 4.7 percent to 16.5 million barrels, according to the EIA, the Energy Department’s statistical unit. That’s 15 percent below year-earlier levels.

Corn for September delivery rose 3.5 cents, or 0.7 percent, to $4.99 a bushel in Chicago. The more-actively traded December contract gained 1.5 cents to $4.79.

The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, based on September contracts, was 37 cents, up from 34 cents yesterday.

Inventory Projection

Inventories of the ethanol feedstock before the September harvest may be 26 percent below last year, according to U.S. Agriculture Department data.

Tracking certificates called Renewable Identification Numbers, or RINs, are used by the government and refiners to monitor compliance with the energy law.

Corn-based-ethanol RINs added 7 cents today to $1.09, while advanced RINs, which cover Brazilian sugarcane-based ethanol and biodiesel, climbed 9 cents to $1.15, data compiled by Bloomberg show.

In cash market trading, ethanol in the U.S. Gulf was unchanged at $2.32 a gallon; on the West Coast prices gained 5 cents to $2.48; in Chicago the additive rose 1.5 cents to $2.25; and in New York the biofuel added 1 cent to $2.375 a gallon, data compiled by Bloomberg show.

West Coast ethanol’s premium over the Gulf widened 5 cents to 16 cents, while Chicago’s discount to New York slimmed 0.5 cent to 12.5 cents.

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