Bloomberg News

Ethanol Gains Fourth Time This Week on Higher Blending Demand

October 28, 2011

Oct. 28 (Bloomberg) -- Ethanol futures advanced for the fourth time this week in Chicago on increased demand for the fuel to be mixed into gasoline.

Futures gained two days after an Energy Department report showed production of conventional gasoline mixed with ethanol, a proxy for increased blending consumption, rose 1 percent to 5.15 million barrels a day, the highest since Sept. 30. Ethanol in Chicago gained 1 cent, or 0.4 percent, to $2.785 a gallon, up 9.2 percent this month, according to data compiled by Bloomberg.

“The physical markets are so strong,” said Jerrod Kitt, an analyst at the Linn Group in Chicago. “The tail is still kind of wagging the dog right now. The main driver here is the physical markets. It’s just gangbusters. People might have held off expecting lower prices.”

Denatured ethanol for November delivery climbed 1.8 cents, or 0.7 percent, to $2.753 a gallon on the Chicago Board of Trade, the highest settlement price since Sept. 12. The futures have risen 16 percent this year.

Ethanol in the U.S. Gulf climbed 1.5 cents, or 0.5 percent, to $2.865 a gallon, according to Bloomberg data. Ethanol in New York rose 0.5 cent to $3.005 a gallon, and on the West Coast the fuel lost 0.5 cent to $3.03.

The fuel is blended with gasoline to stretch supply and meet federal mandates. Refiners are required by law to use 12.6 billion gallons of renewable fuels such as ethanol this year.

Fuel suppliers receive a 45-cent tax credit for each gallon of the biofuel mixed into gasoline.

--Editors: Bill Banker, David Marino

To contact the reporter on this story: Mario Parker in Chicago at mparker22@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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