Ethanol futures rose as gasoline surged to a nine-month high after the U.S. escalated warnings to Iran about its nuclear program.
Futures advanced to the highest level in seven weeks, following gasoline higher after U.S. officials warned that the nation could join Israel in attacking Iran if the Islamic republic doesn’t dispel concerns that its nuclear-research program is aimed at producing weapons.
“Crude’s up today and gasoline was on fire,” said Will Babler, a broker at First Capitol Risk Management Inc. in Galena, Illinois. “That carried over to ethanol.”
Denatured ethanol for March delivery gained 0.4 cent to $2.264 a gallon on the Chicago Board of Trade, the highest price since Jan. 11. Futures have risen 2.8 percent this year.
In cash market trading, ethanol in New York jumped 5.5 cents, or 2.4 percent, to $2.31 a gallon and in the U.S. Gulf the biofuel increased 5.5 cents, or 2.5 percent, to $2.295, according to data compiled by Bloomberg.
Ethanol in Chicago added 4.5 cents, or 2.1 percent, to $2.22 a gallon and on the West Coast the additive rose 2.5 cents, or 1.1 percent, to $2.35.
Crude oil for April delivery rose $1.77 to settle at $108.84 a barrel on the New York Mercantile Exchange, then climbed past $110 after a report of a pipeline explosion in Saudi Arabia.
Gasoline for April delivery gained 9.45 cents, or 2.9 percent, to $3.3517 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.
Ethanol traded at a record $1.09-a-gallon discount to gasoline, based on today’s prices, giving refiners incentive to blend the fuel to capture the spread between the two, Babler said.
Industry advocates are working to get higher blends of the fuel beyond the current 10 percent typically found at pumps sold at filling stations, after winning a victory from the U.S. Environmental Protection Agency last year to allow gasoline to contain as much as 15 percent ethanol for vehicles made after 2001.
Distillers are losing 11 cents per gallon of ethanol, based on current prices for corn and the biofuel and assuming a bushel of corn generates 2.75 gallons of ethanol, according to data compiled by Bloomberg.
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