Ethanol Advances on Lower Supply and Federal Reserve DecisionMario Parker
Ethanol rose the most in more than a week after a government report showed stockpiles of the fuel declined and after the Federal Reserve unexpectedly left intact its level of bond buying.
Futures jumped 3.3 percent after the Fed said it would continue buying $85 million in Treasuries each month. Separately, an Energy Information Administration report showed record-low ethanol supply and below-average production levels for this time of year.
“Those were bullish stats,” said Ian Jackson, a trader at SCB & Associates LLC in Chicago. “The market’s genuinely tight.”
Denatured ethanol for October delivery rose 5.9 cents, or 3.3 percent, to $1.844 a gallon on the Chicago Board of Trade. Futures have dropped 16 percent this year.
Gasoline for October delivery advanced 8.1 cents, or 3 percent, to $2.7421 a gallon on the New York Mercantile Exchange, widening its premium to ethanol by 2.2 cents to 89.81 cents. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Ethanol is made primarily from corn in the U.S., with one bushel making at least 2.75 gallons of the renewable fuel.
Corn for December delivery added 2.25 cents, or 0.5 percent, to $4.5625 a bushel in Chicago. The December crush spread of corn to ethanol was minus 2 cents a gallon. All of the crush spreads through 2015 were negative.
Ethanol production fell 1.2 percent to 838,000 barrels a day last week, the Energy Department’s analytical arm said in the report today.
Stockpiles dropped 0.6 percent to 16.2 million barrels, 16 percent lower than a year earlier, the EIA said, while imports tumbled 80 percent to 3,000 barrels a day, the smallest since June 28, when the U.S. made no foreign purchase of the additive.
Anhydrous ethanol in Sao Paulo, where sugarcane is used to make the biofuel, rose 3.8 percent to $2.14 a gallon last week, a seven-week high, data compiled by Bloomberg show.
Ethanol is part of the country’s energy plans to reduce dependence on fossil fuels. Compliance with federal consumption targets is tracked by Renewable Identification Numbers, or RINs, that are attached to each batch of biofuel and that can be traded among refiners.
Corn-based-ethanol RINs added 4 cents to 52 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, climbed 4 cents to 61 cents, data compiled by Bloomberg show.
In cash market trading, ethanol rose 5 cents to $2.185 in New York, 7 cents to $2.36 in Chicago and 8.5 cents to $2.445 on the Gulf Coast, data compiled by Bloomberg show. On the West Coast, it fell 4.5 cents $2.31.
West Coast ethanol’s discount to the Gulf stretched 13 cents to 13.5 cents. Chicago’s premium to New York Harbor swelled 2 cents to 17.5 cents.