Dec. 9 (Bloomberg) -- Ethanol’s discount to gasoline narrowed on increased demand and signs of tight supply.
The spread, or price difference, contracted 7.4 cents to 65.99 cents a gallon. On the spot market, ethanol reached $3.60 a gallon in New York Harbor on Dec. 6, the highest level since July 7, 2006. Supply along the population-dense U.S. East Coast was at a record low in the week ended Nov. 29, Energy Information Administration data show.
“There’s tight stocks and production is at relatively high rates,” said Will Babler, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “It all points to solid demand.”
Denatured ethanol for January delivery rose 2.2 cents, or 1.1 percent, to $2.015 a gallon on the Chicago Board of Trade. The price is up 20 percent in the past month.
Gasoline for January delivery fell 5.2 cents, or 1.9 percent, to $2.6749 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 been above 900,000 barrels a day since Oct. 25, data from the Energy Department’s statistical unit show, as cheaper feedstock allows companies to boost output. Total stockpiles were at 15.1 million barrels in the week ended Nov. 29, 22 percent lower than a year earlier.
The additive is made mostly from corn in the U.S., with one bushel of the grain making at least 2.75 gallons.
Corn for December delivery rose 4.5 cents, or 1.1 percent, to $4.285 a bushel in Chicago. The more-active March contract added 3.75 cents to $4.38.
The corn crush spread, or the difference between a gallon of ethanol and the corn needed to make it, was 15 cents, based on the March contracts, data compiled by Bloomberg show.
In cash market trading, ethanol slipped 5 cents to $3.55 a gallon in New York, 7 cents to $2.58 in Chicago and 7 cents to $2.68 on the Gulf Coast, according to data compiled by Bloomberg. The West Coast price rose 2.5 cents to $2.675.
Chicago’s discount to New York deepened 2 cents to 97 cents, while the Gulf’s premium to the West Coast narrowed 9.5 cents to 0.5 cent.
Ethanol is shipped mostly by rail in the U.S. Traffic along that mode of transport is 2.1 percent higher than a year earlier, data from Bloomberg Industries show.
A later-than-usual record corn harvest and increased crude oil production are increasing congestion in the Midwest, home to many ethanol plants, according to Steven Forsberg, a spokesman for BNSF Railway Co., a unit of Warren Buffett’s Berkshire Hathaway Inc.
The traffic may be supporting ethanol prices as delays exacerbate the shortage on the East Coast, Babler said.
--Editors: Richard Stubbe, Margot Habiby