Dec. 2 (Bloomberg) -- Ethanol rose as the widening discount to gasoline encouraged blenders to use the biofuel and exports jumped to an eight-month high.
The biofuel’s spread to gasoline traded at a 96.54-cent discount to gasoline based on January contracts, up from 96.48 cents on Nov. 29. The average for 2013 is about 57 cents a gallon. Ethanol exports rose to 1.29 million barrels in September, the highest since January, data from the Energy Information Administration show. While output increased 15 percent this year, inventories declined 26 percent, the EIA said Nov. 27.
“The market is tight, especially in the short term,” said Nelson Ostanello, chief executive officer at the Brazilian arm of London-based Greenergy Fuels Holdings Ltd. “Distillers have been raising output, but there isn’t enough ethanol out there for this kind of demand.”
Denatured ethanol for January delivery gained 1.5 cents, or 0.9 percent, to close at $1.713 a gallon on the Chicago Board of Trade. The December contract soared 15 cents, or 7.3 percent, to $2.20.
January-delivery gasoline advanced 1.56 cents, or 0.6 percent, to $2.6784 at the close on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.
Corn contracts for March delivery were unchanged at $4.245 a bushel. The difference between the cost of corn and the price of a gallon of ethanol, known as the corn crush spread, was 69 cents a gallon based on December contracts, up from 54 cents Nov. 29, data compiled by Bloomberg show. One bushel of corn makes at least 2.75 gallons of the biofuel.
The U.S. Environmental Protection Agency enforces the nation’s biofuel consumption mandate with tracking certificates called Renewable Identification Numbers. They are attached to each gallon of the fuel and can be traded among refiners.
Corn-based ethanol RINs advanced 2 cents to 28 cents, data compiled by Bloomberg show. Prices have soared 27 percent since Nov. 15, when the EPA announced a proposal to cut the renewable fuel requirements for 2014 by 16 percent from a 2007 legislation.
“Obligated parties slowed demand prior to the EPA announcement and are now back to the market,” David Dunn, a commodities analyst at brokerage firm Progressive Fuels Limited, said in a telephone interview from Naples, Florida. “It’s pent- up demand propelling RIN prices in the short term.”
Advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol, rose 3.5 cents to 29.5 cents.
Ethanol dropped in major cash markets for the second straight session. Prices slid 4.5 cents to $2.705 a gallon in New York, 3.5 cents to $2.565 on the Gulf Coast, 12.5 cents to $2.60 on the West Coast and 27.5 cents to $2.40 in Chicago, data compiled by Bloomberg show.
Chicago traded at a 30.5-cent discount to New York, while the West Coast’s premium to the Gulf narrowed 9 cents to 3.5 cents.
--Editors: Richard Stubbe, David Marino