Bloomberg News

Ethanol’s Discount to Gasoline Slims to Four-Month Low on Supply

April 17, 2013

Ethanol’s discount to gasoline reached the narrowest level in four months after a government report showed production slumped.

The spread, or price difference, tightened 8.69 cents to 29.09 cents a gallon at 10:59 a.m. New York time, the least since Dec. 11, after an Energy Information Administration report showed output fell 2.6 percent to 832,000 barrels a day, the lowest for this time of year in records going back to June 2010 and 5.9 percent below year-earlier levels.

“Today’s EIA release was somewhat bullish, reporting lower production and a small draw in inventories,” said Michael Breitenbach, an analyst and trader at Blue Ocean Brokerage LLC in New York.

Denatured ethanol for May delivery rose 3.4 cents, or 1.4 percent, to $2.438 a gallon on the Chicago Board of Trade. Prices have gained 11 percent this year.

Gasoline for May delivery plunged 5.29 cents, or 1.9 percent, to $2.7289 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Ethanol production has struggled to rebound to levels before last summer’s drought in the U.S. wilted corn crops and eroded returns to manufacture the biofuel.

Corn for May delivery fell 1.25 cents to $6.62 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, representing gains or losses from turning corn into ethanol and based on May contracts, was 3 cents a gallon, up from minus 1 cent yesterday. The amount doesn’t include revenue from the sale of dried distillers’ grains, a byproduct of ethanol production, which can be fed to livestock.

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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