Bloomberg News

Ethanol Discount to Gasoline Tightens to Narrowest in Two Weeks

June 21, 2013

Ethanol’s discount to gasoline tightened to the narrowest in more than two weeks with production of the biofuel behind year-ago levels.

The spread, or price difference, contracted by 3.35 cents to 29.77 cents a gallon. Output of the fuel has been below-average this year, data compiled by Bloomberg show. The Energy Information Administration said June 19 that output last week declined 1.2 percent to 873,000 barrels a day, down 3 percent from the same period in 2012.

“We’re seeing some producers buying in the front,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “Whenever you see producers buying, you know the market is pretty tight.”

Denatured ethanol for July delivery rose 0.8 cent to $2.464 a gallon on the Chicago Board of Trade. Prices have gained 13 percent this year.

Gasoline for July delivery slumped 2.55 cents, or 0.9 percent, to $2.7617 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

The additive’s discount to gasoline is the narrowest since June 5.

Ethanol stockpiles have dropped 22 percent to 16.5 million barrels in the past year, the EIA, the Energy Department’s analytical arm, said this week.

Corn Declines

Corn for July delivery decreased 11.5 cents to $6.6175 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 at 6 cents, up from 1 cent yesterday, data compiled by Bloomberg show.

Compliance with the ethanol blending law is tracked by Renewable Identification Numbers, or RINs, certificates attached to each gallon of biofuel that refiners can submit to the government or trade.

Corn-based ethanol RINs climbed 2 cent to 95 cents and advanced RINs, which cover Brazilian sugarcane-based ethanol and biodiesel, added 1 cent to $1.03, data compiled by Bloomberg show.

Spot Market

In cash market trading, ethanol in Chicago increased 5 cents to $2.49 a gallon; in the U.S. Gulf prices increased 3.5 cents to $2.575; on the West Coast the fuel gained 3.5 cents to $2.78; and in New York the additive jumped 2 cents to $2.56 a gallon, data compiled by Bloomberg show.

New York’s premium over Chicago narrowed 3 cents to 7 cents while the U.S. Gulf’s discount to the West Coast was unchanged at 20.5 cents.

The U.S. imported 65,000 barrels a day of the fuel last week, the second highest amount this year, trailing the 67,000 barrels in the week ended Jan. 18, EIA data show.

Anhydrous ethanol in Sao Paulo cost $2.29 a gallon last week, data compiled by Bloomberg show.

Ethanol-blended gasoline made up 93.58 percent of the total U.S. gasoline pool last week, down 0.5 percent from last week, EIA data 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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