Ethanol Sinks as Price Discourages Refiners From Blending
December 02, 2011, 5:16 PM ESTBy Mario Parker
Dec. 2 (Bloomberg) -- Ethanol futures sank in Chicago as its price compared to gasoline reduced blending demand and as corn declined.
Futures fell two days after the Energy Department reported production of conventional gasoline blended with ethanol plunged the most in six months last week. The additive averaged a 3.6- cent premium to gasoline in November, versus a 22-cent discount over the past year that refiners were able to pocket in addition to a 45-cent credit for each gallon mixed with the motor fuel.
“You’ve got everything kind of pressed against you and I think you can see that in the last EIA report,” said Jerrod Kitt, an analyst at the Linn Group in Chicago. “On the West Coast, you were probably paying money to blend ethanol.”
Denatured ethanol for December delivery fell 2.4 cents, or 1 percent, to $2.503 a gallon on the Chicago Board of Trade. Prices have gained 5.3 percent this year.
In cash market trading, ethanol in Chicago slid 3 cents, or 1.1 percent, to $2.68 a gallon and in New York the biofuel dropped 2.5 cents, or 0.9 percent, to $2.795, according to data compiled by Bloomberg.
Ethanol in the U.S. Gulf decreased 1.5 cents, or 0.5 percent, to $2.805 and on the West Coast the additive increased 1 cent, or 0.4 percent, to $2.805.
Production of conventional gasoline blended with ethanol tumbled 3.7 percent to 4.94 million barrels a day, the biggest drop and lowest amount since May 6.
Ethanol prices have fallen 10 percent since Nov. 2 when its premium to gasoline rose to 15.88 cents, the highest level since November 2010. Ethanol’s discount to gasoline widened to 11.32 cents today, the most since Oct. 14.
Corn for March delivery tumbled 6.25 cents, or 1 percent, to $5.9525 a bushel in Chicago. The grain is the primary input for making ethanol in the U.S.
Prices for the feedstock fell on speculation global demand for U.S. supply will wane, Kitt said.
--Editors: Richard Stubbe, Dan Stets
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
