Ethanol’s Discount to Gasoline Narrows on Tight Supplies
Ethanol strengthened against gasoline, which dropped the most in almost three weeks as Brent crude fell. Ethanol output is below last year’s levels.
The spread narrowed 5.78 cents to 44.01 cents a gallon as gasoline fell with Brent, which settled at the lowest level this year. Ethanol production in the first 10 weeks of the year is down 14 percent from a year earlier, according to Energy Information Administration data. Companies cut output after drought in the Midwest last year elevated corn prices, which advanced for a second day.
“With uncertainty about corn this summer, the plants are probably still a little nervous,” Jim Damask, a manager at Starfuels Inc. in Jupiter, Florida, said by telephone. “There’s just not a lot of it available, especially for the front-month contract.”
Denatured ethanol for April delivery fell 2.6 cents, or 1 percent, to $2.605 a gallon on the Chicago Board of Trade. Prices have climbed 19 percent this year.
Gasoline futures for April delivery declined 8.38 cents, or 2.7 percent, to $3.0451 a gallon on the New York Mercantile Exchange, the biggest drop since Feb. 27. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
Corn for May delivery gained 8.5 cents, or 1.2 percent, to $7.285 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.
The corn crush spread, representing gains or losses from turning corn into ethanol and based on May contracts, was minus 8 cents a gallon versus minus 3 cents yesterday. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.
At least 19 ethanol plants have been idled since June, according to the Renewable Fuels Association in Washington. Valero Energy Corp. (VLO), the third-biggest U.S. ethanol producer, has restored operations at a plant in Bloomingburg, Ohio, and plans to restart a mill in Linden, Indiana.
“That’ll certainly help a little bit, but we need more plants to get online to see an impact,” Damask said.
The U.S. hasn’t imported ethanol for two straight weeks, the first time that’s happened since June, according to a March 13 report by the EIA, the statistical arm of the Energy Department. Spot ethanol in Sao Paulo fetched $2.37 a gallon last week, climbing 14 percent so far this year, according to data compiled by Bloomberg.
Stockpiles of the U.S. biofuel slid for a sixth week to 18.7 million barrels in the week ended March 8, 15 percent below a year earlier, the EIA said. Ethanol-blended gasoline made up about 93 percent of the total U.S. gasoline pool last week, down from 94 percent the previous week, the data show.
Renewable Identification Numbers, or RINs, for corn-based ethanol were at 77 cents yesterday after peaking at $1.06 March 8, according to data compiled by Bloomberg. Refiners submit RINs to the Environmental Protection Agency to show compliance with a U.S. biofuels law, which requires refineries to use 13.8 billion gallons of ethanol, or 900,000 barrels a day, this year and 14.4 billion next year.
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