Ethanol Futures Advance on Lower Output With Gasoline Demand Up

Dec 26, 2013 3:52 pm ET

Dec. 26 (Bloomberg) -- Ethanol futures rose to a two-week high as distillers were unable to sustain high production levels amid increased demand for gasoline.

Ethanol’s discount to the motor fuel was little changed at 87.1 cents a gallon from 87.12 on Dec. 24. Gasoline demand climbed 8 percent in the week ended Dec. 13 while U.S. ethanol production slid 1.7 percent, the Energy Information Administration said. The EIA is to report last week’s output, stockpile and import levels at 11 a.m. tomorrow in Washington.

“Distillers have been facing technical difficulties to sustain such high production levels,” Renan Pimenta, an analyst with Intl FCStone Inc in Campinas, Brazil, said.

Denatured ethanol for January delivery gained 0.6 cent, or 0.3 percent, to settle at $1.949 a gallon on the Chicago Board of Trade, the highest level since Dec. 10. Prices advanced for an eighth straight session.

Gasoline for January delivery rose 0.58 cent, or 0.2 percent, to $2.82 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

Corn for March delivery declined 8.25 cents, or 1.9 percent, to $4.2625 a bushel in Chicago. The corn crush spread, or the difference between the cost of corn and the price of a gallon of ethanol, was 20 cents, up from 17 cents on Dec. 24. Ethanol is produced mostly from corn in the U.S., with one bushel making at least 2.75 gallons of the fuel.

In cash market trading, ethanol gained 2.5 cents to $2.25 a gallon in Chicago, data compiled by Bloomberg show. It was unchanged at $2.30 in New York, $2.32 on the Gulf Coast and $2.60 on the West Coast.

New York’s premium to Chicago narrowed 2.5 cents to 5 cents while the Gulf’s discount to the West Coast was unchanged at 28 cents.

--Editors: Charlotte Porter, Bill Banker