Bloomberg News

Ethanol Futures Rise Fourth Day as Crude Oil, Gasoline Advance

November 16, 2011

Nov. 16 (Bloomberg) -- Ethanol futures rose a fourth day in Chicago as crude oil and gasoline advanced, sparking optimism that biofuel demand will increase.

Futures jumped to the highest price in more than a week amid an increase in oil after Enbridge Inc. said it will reverse direction of the Seaway pipeline that runs between Cushing, Oklahoma, and the refineries along the U.S. Gulf Coast. Ethanol, blended with gasoline, is part of U.S. energy plans to reduce dependence on oil.

“It’s all about making money and trying to make money,” said Peyton Feltus, president of Randolph Risk Management Inc. in Dallas. “If the market’s giving them a reason to blend it they’re happy to do it.”

Denatured ethanol for December delivery rose 1.5 cents, or 0.6 percent, to $2.695 a gallon on the Chicago Board of Trade. The futures have increased 13 percent this year.

Refiners receive a 45-cent tax credit for each gallon of ethanol blended with gasoline, an incentive that’s set to expire on Dec. 31.

Production of conventional gasoline blended with ethanol increased 3.1 percent to 5.2 million barrels a day last week, the biggest jump since June 10, according to an Energy Department report released today in Washington.

In cash market trading, ethanol in the U.S. Gulf was unchanged at $2.985 a gallon and in Chicago the biofuel lost 0.5 cent to $2.965, according to data compiled by Bloomberg.

Ethanol in New York increased 5.5 cents, or 1.8 percent, to $3.065 a gallon and on the West Coast the alternative fuel added 4 cents, or 1.3 percent, to $3.085.

Crude oil for December delivery rose $3.22, or 3.2 percent, to $102.59 a barrel on the New York Mercantile Exchange, the highest settlement since May 31. Futures are up 12 percent this year.

Gasoline for December delivery jumped 4.16 cents, or 1.6 percent, to $2.6273 a gallon in New York. The contract includes reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

--Editors: David Marino, Charlotte Porter

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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