Bloomberg News

Ethanol Snaps Four-Day Losing Streak on Discount to Gasoline

October 26, 2012

Ethanol futures snapped the longest streak of losses in six weeks as their discount to gasoline widened, bolstering the biofuel’s allure to refiners.

Prices rebounded as gasoline’s premium to the biofuel reached 31.81 cents, the highest level in more than a week, based on settlement prices. Ethanol is blended with the motor fuel to stretch supply and meet federal mandates, and refiners stand to pocket the difference between the two.

“Ethanol was sort of stronger today,” said Jim Damask, a manager at BiofuelsConnect, a Jupiter, Florida-based alternative energy broker. “We’re still below gasoline.”

Denatured ethanol for November delivery added 0.1 cent to $2.381 a gallon on the Chicago Board of Trade, rebounding from the lowest price since Oct. 16 and snapping the longest losing streak since Sept. 12. Futures have gained 8.1 percent this year.

In cash market trading, ethanol was unchanged in New York at $2.45 a gallon and on the West Coast at $2.545, data compiled by Bloomberg shows.

Ethanol in the U.S. Gulf climbed 1 cent, or 0.4 percent, to $2.445 a gallon and in Chicago the additive decreased 0.5 cent to $2.38.

Gasoline for November delivery advanced 2.27 cents, or 0.9 percent, to $2.6991 a gallon in New York. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Trading Premium

Ethanol’s discount to the motor fuel expanded to the highest since Oct. 18 from 29.64 cents yesterday. Gasoline traded at a premium of 99.8 cents to ethanol as recently as Sept. 28.

Ethanol-blended gasoline made up about 93 percent of the total U.S. gasoline pool last week, the Energy Department said Oct. 24.

Corn for December delivery tumbled 4.25 cents, or 0.6 percent, to $7.3775 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.

Based on December contracts for ethanol and corn, producers are losing about 31 cents on each gallon of the biofuel made, according to data compiled by Bloomberg. That doesn’t include profit from the sale of dried distillers’ grains, a byproduct of ethanol production that can be fed to livestock.

The value of Renewable Identification Numbers, known as RINs, fell 1.3 percent to 3.7 cents, data compiled by Bloomberg show. RINs are credits that help the government track whether refiners are meeting 2012 federal ethanol use mandates.

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


The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus