Bloomberg News

Ethanol-RBOB Spread Falls as Supplies Drop, Corn Rallies

March 01, 2013

Ethanol’s discount to gasoline widened as imports of the biofuel rose to a seasonal high.

The spread to reformulated gasoline, or RBOB, futures grew 1.19 cents to 71.46 cents a gallon as the market began trading the April contract. The differential was at the lowest level in more than a month two days earlier.

U.S. imports of ethanol climbed 11,000 barrels to 32,000 barrels in the week ended Feb. 22, the highest level for this time of year since data started being collected in 2010, Energy Information Administration data showed. Corn rallied for a fifth day, while gasoline advanced after the largest monthly slide since October.

“An increase in imports is certainly bearish for the market,” Jason Ward, an analyst at Northstar Commodity Investment Inc., said in a phone interview from Minneapolis.

Denatured ethanol for April delivery gained 0.5 cent to settle at $2.414 a gallon on the Chicago Board of Trade. The March contract, which expires March 5, rose 0.1 cent to $2.406.

Gasoline for April delivery gained 1.69 cents, or 0.5 percent, to $3.1286 a gallon on the New York Mercantile Exchange. The front-month gasoline contract declined 3.7 percent in February, the biggest monthly drop since October.

Corn for May delivery rose 5 cents, or 0.7 percent, to $7.085 a bushel, a three-week high for the contract.

The corn crush spread, representing gains or losses from turning a bushel of corn into ethanol, was minus 23 cents a gallon based on March contracts for ethanol and corn, according to data compiled by Bloomberg. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

RINs Advance

The value of Renewable Identification Numbers, or RINs, for corn-based ethanol reached a record 56 cents yesterday. RINs are credits that help the Environmental Protection Agency track compliance with federal biofuel-use mandates, which call for U.S. refiners to use 13.8 billion gallons of ethanol, or 900,000 barrels a day, this year and 14.4 billion next year.

Ethanol-blended gasoline made up 88 percent of the total U.S. gasoline pool last week, down from 90 percent the previous week-earlier period, the EIA reported. Production gained 15,000 barrels to 812,000 barrels in that same time period, a fourth consecutive weekly gain, the data showed.

The biofuel rose the most in cash market trading on the U.S. West Coast, where spot prices advanced 2 cents to $2.62 a gallon, data compiled by Bloomberg showed. Ethanol fell 2.5 cents to $2.445 a gallon on the Gulf Coast, 2 cents to $2.395 in Chicago and 1 cent to $2.515 in New York.

To contact the reporter on this story: Christine Harvey in New York at charvey32@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net


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