Aug. 14 (Bloomberg) -- Ethanol’s discount to gasoline contracted after the Energy Information Administration said inventories tumbled to a five-week low.
The spread narrowed 2.55 cents to 77.7 cents a gallon following the EIA report, which said supplies fell 1.7 percent to 16.4 million barrels last week, the lowest level since July 5. An Agriculture Department report on Aug. 12 estimated corn stockpiles will be 27 percent lower than a year ago before this year’s harvest, tightening the availability of the ethanol feedstock.
“Over the next five to six weeks, we expect a huge reduction in stocks,” said Terry Reilly, senior commodity analyst at Futures International LLC in Chicago.
Denatured ethanol for September delivery rose 6.6 cents, or 3.1 percent, to $2.206 a gallon on the Chicago Board of Trade. Futures have gained 0.7 percent this year.
Gasoline for September delivery added 4.05 cents, or 1.4 percent, to $2.983 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-blended gasoline made up 94 percent of the total U.S. gasoline pool in the week ended Aug. 9, up from 90 percent the previous period, the EIA, the Energy Department’s statistical arm, said.
Production rose 0.5 percent to 857,000 barrels a day, the highest level since July 12.
Reilly said he expects ethanol plants to shut for scheduled maintenance over the next month as corn becomes more difficult to procure.
Corn for September delivery rose 9.5 cents, or 2.1 percent, to $4.6475 a bushel in Chicago. The more actively traded December contract gained 8 cents to $4.5525.
The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, based on September contracts, was 52 cents, up from 48 cents yesterday, data compiled by Bloomberg show.
Imports of the fuel fell 36 percent to 36,000 barrels a day last week, EIA said.
Anhydrous ethanol in Sao Paulo cost $2.05 a gallon last week, the lowest price since May. 7, 2010, data compiled by Bloomberg show.
In cash market trading, ethanol rose 7 cents to $2.55 a gallon in New York, 4.5 cents to $2.31 in Chicago, 4.5 cents to $2.41 on the Gulf Coast and 3.5 cents to $2.525 on the West Coast, data compiled by Bloomberg show.
West Coast ethanol’s premium to the Gulf slimmed 1 cent to 11.5 cents. Chicago’s discount to New York Harbor expanded 2.5 cents to 24 cents, the widest since Aug. 6.
--Editors: Richard Stubbe, Margot Habiby