Ethanol Gains With Demand Rising Amid Low Inventories

Ethanol gained on speculation that rising production won’t be enough to keep up with demand and bolster stockpiles.

The additive’s discount to gasoline, based on January contracts, narrowed 0.47 cent to 96.07 cents a gallon. Motor fuel consumption is up 4.5 percent and ethanol inventories are down 18 percent from a year earlier, according to data from the Energy Information Administration.

“It’s just astonishing that we’re producing at the levels we’re producing at and we can’t rebuild stocks,” said Jerrod Kitt, an analyst at Linn Group in Chicago. “Just pure demand.”

Denatured ethanol for January delivery climbed 5 cents, or 2.9 percent, to $1.763 a gallon on the Chicago Board of Trade. The less active December contract, which expires tomorrow, jumped 15 cents, or 6.8 percent, to $2.35. Futures have increased 7.3 percent this year.

Gasoline for January delivery added 4.53 cents, or 1.6 percent, to $2.7237 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 refinery and blender inputs, a measure of demand, through Nov. 22 has been 2.1 percent higher than the same period in 2012, according to the EIA, the Energy Department’s statistical unit.

“Your gasoline demand has been better than anyone anticipated,” Kitt said. “There is some export demand, too, both actual and anticipatory.”

Ethanol Exports

Ethanol exports rose to 1.29 million barrels in September from 814,000 in June, EIA data show. Stockpiles on Nov. 22 were 15.02 million barrels, 0.4 percent above the record low of 14.96 million set Oct. 25. The EIA began keeping weekly totals of ethanol inventories in June 2010.

Makers of the biofuel have lifted production 20 percent to 927,000 barrels a day from an all-time low in January on what the U.S. Agriculture Department forecasts as a record corn crop.

Corn for December delivery climbed 5.5 cents, or 1.3 percent, to $4.22 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

The corn crush spread, or the difference between the cost of corn and the price of a gallon of ethanol, based on December contracts, was 82 cents, up from 69 cents yesterday, data compiled by Bloomberg show.

Kitt said the impact of the tighter supply and robust demand is most pronounced in the spot market.

In cash market trading, ethanol advanced 27 cents to $2.975 a gallon in New York, 15 cents to $2.55 in Chicago and 8.5 cents to $2.65 on the Gulf Coast, according to data compiled by Bloomberg. On the West Coast, ethanol slipped 8.5 cents to $2.515.

The Gulf traded at a 13.5-cent premium to the West Coast from a 3.5-cent deficit yesterday, while Chicago’s discount to New York deepened 12 cents to 42.5 cents, the widest in records going back to February 2007.

The U.S. Environmental Protection Agency enforces the nation’s biofuel consumption mandate with tracking certificates called Renewable Identification Numbers. They are attached to each gallon of the fuel and can be traded among refiners.

Corn-based ethanol RINs rose 1 cent to 29 cents, while advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, added 1.5 cents to 31 cents, data compiled by Bloomberg show.

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