Ethanol-Gasoline Discount Narrows on Record-Low Supplies

Ethanol’s discount to gasoline shrank as nationwide inventories of the biofuel fell to the lowest level in three years of data.

The ethanol-gasoline spread narrowed 4.06 cents to 90 cents a gallon today, the first contraction in four days, according to data compiled by Bloomberg.

The biofuel advanced after a government report showed U.S. stockpiles slumped 119,000 barrels, or 0.8 percent, to 15.4 million barrels in the week ended Oct. 4, the least in U.S. Energy Information Administration data going back to 2010. Production slipped to 868,000 barrels a day from 875,000 the prior week. There were no U.S. imports.

“We have tight stocks and imports haven’t been anywhere near what we expected,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “That’s giving support to prices.”

Denatured ethanol for November delivery rose 3.3 cents, or 2 percent, to settle at $1.723 a gallon on the Chicago Board of Trade. Futures have dropped 21 percent this year.

November-delivery gasoline slipped 0.76 cent to $2.623 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for December delivery gained 1.75 cents to $4.435 a bushel. Futures rebounded after falling the most in a week yesterday on speculation that harvesting would accelerate across the U.S. Midwest because of dry weather. The December crush spread of corn to ethanol was 3 cents, up from 1 cent yesterday.

‘Little Bit’

“There’s a little bit of corn out there already,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “It seems more and more corn should become available as the days go on. The longer into the harvest, the cheaper ethanol should become.”

In cash market trading, ethanol rose 6 cents to $2.11 a gallon on the U.S. West Coast, according to data compiled by Bloomberg. Prices climbed 4 cents to $2.25 a gallon in New York, fell 2.5 cents to $2.05 a gallon in Chicago and slid 0.5 cent to $2.15 on the Gulf Coast.

New York’s premium to Chicago grew 6.5 cents to 20 cents, the widest in a week, while the West Coast’s discount to the Gulf coast narrowed 6.5 cents to 4 cents.

The government tracks compliance with federal blending mandates with Renewable Identification Numbers, or RINs, certificates attached to each gallon of biofuel that are submitted to the government and can be traded among companies.

Corn-based RINs gained 3 cents to 42 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, rose 2 cents to 52 cents, data compiled by Bloomberg show.

Before it's here, it's on the Bloomberg Terminal.