Bloomberg News

Ethanol Declines as Blending Falls and Export Demand Wanes

December 06, 2011

Dec. 6 (Bloomberg) -- Ethanol futures fell in Chicago amid lower demand for blending with gasoline and on speculation Europe’s debt crisis will curtail exports.

Futures sank as European leaders wrestle with the region’s debt crisis. The U.S. exports the biofuel to countries such as the United Kingdom, Finland and the Netherlands. Separately, an Energy Department report last week showed production of conventional gasoline blended with ethanol, a proxy for use of the fuel beyond government requirements, dropped the most in six months.

“Ethanol was weaker today with the front of the curve continuing to see pressure,” SCB & Associates LLC wrote in a report. “Ongoing euro zone debt worries and thin trade combined with the growing amount of product in the market as exports have slowed and demand has slacked to weaken the market.”

Denatured ethanol for January delivery fell 2.3 cents, or 1 percent, to $2.181 a gallon on the Chicago Board of Trade.

In cash market trading ethanol on the West Coast tumbled 20 cents, or 7.3 percent, to $2.525 a gallon and in New York the additive dropped 16.5 cents, or 6.1 percent, to $2.525, according to data compiled by Bloomberg.

Ethanol in Chicago decreased 15 cents, or 5.8 percent, to $2.425 a gallon and in the U.S. Gulf the biofuel slid 13 cents, or 4.8 percent, to $2.575.

U.S. ethanol exports averaged 84,000 barrels a day in September, the most recent month data is available, down 14 percent from the record 98,000 barrels a day in July, according to the Energy Department.

Production of conventional gasoline blended with ethanol tumbled 3.7 percent to 4.94 million barrels a day in the week ended Nov. 25, the biggest drop and smallest amount since May 6.

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

--Editors: David Marino, Richard Stubbe

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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