Bloomberg News

Ethanol Slumps Against Gasoline for Sixth Day on Cheaper Corn

June 10, 2013

Ethanol slumped a sixth day against gasoline on speculation that cheaper corn prices will help boost output of the fuel and replenish stockpiles.

The spread, or price difference, widened 0.36 cent to 36.91 cents a gallon, extending the longest streak of the additive’s losses versus the motor fuel since January. Production jumped to the highest level in more than 11 months in the week ended May 31, data from the Energy Information Administration showed. Corn slipped.

“Today we have ourselves a lower corn market and ethanol’s down, too,” said Jason Ward, an analyst at Northstar Commodity Investments LLC in Minneapolis. “I’m still optimistic about production. Based on margins, it favors production coming back online or, if you’re already up, still operating.”

Denatured ethanol for July delivery slipped 2.7 cents, or 1.1 percent, to $2.479 a gallon on the Chicago Board of Trade. Prices have gained 13 percent this year.

Gasoline for July delivery sank 2.34 cents, or 0.8 percent, to $2.8481 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Refiners are required to use 13.8 billion gallons, or 900,000 barrels a day, of the fuel this year under a 2007 energy law known as the Renewable Fuels Standard. Compliance is tracked by Renewable Identification Numbers, or RINs, certificates attached to each gallon of biofuel. Once ethanol is blended with petroleum, companies can keep the RIN to show adherence to the law or trade it to another party.

RINs Prices

Corn-based ethanol RINs for 2013 fell 0.9 cent to 94 cents. Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, climbed 0.4 cent to $1.065.

Ethanol production rose 2.6 percent to 885,000 barrels a day in the week ended May 31, a June 5 report from the Energy Department’s analytical arm showed, the highest level since June 15 and the biggest weekly gain since April 5.

That’s down 2.1 percent from a year earlier, before the worst U.S. drought since the 1930s baked corn crops and wiped out returns for companies to make the biofuel.

Stockpiles expanded 2.3 percent to 16.4 million barrels on May 31, rebounding from the lowest level since October 2010 and snapping a five-week streak of declines.

Corn Drops

Corn for July delivery sank 16.25 cents, or 2.4 percent, to $6.50 a bushel in Chicago. The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was 12 cents, up from 8 cents the previous session.

“Right now, as a plant, you’re looking at a marginable position,” Ward said.

In cash market trading, ethanol rose 2 cents to $2.73 a gallon in New York, 3 cents to $2.64 in Chicago, 1.5 cents to $2.74 on the Gulf Coast and 1 cent to $2.84 on the West Coast, data compiled by Bloomberg show. New York Harbor’s premium over Chicago contracted 1 cent to 9 cents. The Gulf Coast’s discount to the West Coast narrowed 0.5 cent to 10 cents.

The U.S. didn’t import any of the fuel in the week ended May 31, EIA data show. Foreign purchases of ethanol have averaged 21,000 barrels a day this year, up from 6,000 barrels a day a year earlier.

Anhydrous ethanol in Sao Paulo cost $2.33 a gallon as of May 31, data compiled by Bloomberg show.

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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