Ethanol Gains Against Gasoline as Discount Boosts Consumption

Ethanol gained for a second day in Chicago on speculation that the biofuel’s discount to gasoline will make it more attractive to blenders.

The spread, or price difference, narrowed 3.35 cents to 83.42 cents a gallon. The average for 2013 is about 58 cents. Ethanol refinery and blender inputs, a measure of demand, are above average for this time of year, according to data compiled by Bloomberg.

“It’s pretty cheap,” said Jim Damask, a trader at StarFuels Inc. in Jupiter, Florida. “It’s still pretty decent margins for these guys.”

Denatured ethanol for January delivery rose 3.7 cents, or 2.1 percent, to $1.813 a gallon on the Chicago Board of Trade, the biggest gain since Dec. 6. Prices have dropped 17 percent this year.

Gasoline for January delivery added 0.35 cent to $2.6472 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Production in the week ended Dec. 6 reached 944,000 barrels a day, the highest since Jan. 6, 2012, data show from the EIA, the Energy Department’s statistical arm.

Corn for March delivery increased 3.5 cents, or 0.8 percent to $4.2675 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol. The corn crush spread, or the price difference between the cost of corn and a gallon of ethanol, based on March contracts, was 9 cents, up from 7 cents yesterday, data compiled by Bloomberg show.

Cash Market

In cash market trading, ethanol rose 17.5 cents to $2.50 a gallon on the West Coast, 4 cents to $2.24 on the Gulf Coast and 3.5 cents to $2.135 in Chicago, data compiled by Bloomberg show. In New York the biofuel sank 12.5 cents to $2.325.

West Coast ethanol’s premium over the Gulf swelled 13.5 cents to 26 cents and Chicago’s discount to New York tightened 16 cents to 19 cents.

Consumption is tracked by Renewable Identification Numbers, certificates attached to each gallon of ethanol that are submitted to the Environmental Protection Agency and that can be traded among refiners.

Corn-based ethanol RINS rose 0.5 cent to 29.5 cents and advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol increased 1 cent to 30.5 cents, according to data from StarFuels Inc., a Jupiter, Florida-based brokerage.

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