Ethanol Advances Against Gasoline on Higher Export Consumption

Jan 02, 2014 4:27 pm ET

Jan. 2 (Bloomberg) -- Ethanol rose against gasoline on higher export demand for the biofuel.

The spread, or price difference, tightened 11.59 cents to 87.6 cents a gallon, based on February contracts for the two fuels. Foreign purchases averaged 41,000 barrels a day in October, up from 27,000 in July, data from the Energy Information Administration show.

“The export market is strong and that’s moving the prompt,” said Chris Wilson, a broker at Atten Babler Risk Management LLC in Galena, Illinois. “These ethanol plants are making a lot of money on spot gallons.”

Denatured ethanol for February delivery increased 2.5 cents, or 1.4 percent, to $1.819 a gallon on the Chicago Board of Trade. The January contract, which expires Jan. 6, added 3.9 cents to $1.95 a gallon.

Gasoline for February delivery declined 9.09 cents, or 3.3 percent, to settle at $2.695 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 exports have averaged above 40,000 barrels a day for both September and October, according to the EIA, the Energy Department’s analytical arm.

Imports Slow

Imports of the additive have slowed. The U.S. hasn’t made any foreign purchases of ethanol since the week ended Sept. 27, EIA data show.

A record harvest for corn has made the additive more competitive, Wilson said. Corn is used to make U.S. ethanol.

Corn for March delivery fell 1.5 cents, or 0.4 percent, to $4.205 a bushel in Chicago. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, or the difference between the cost of corn and the price of ethanol, was 24 cents a gallon based on March contracts, up from 21 cents on Dec. 31.

In cash market trading, ethanol was unchanged in Chicago at $2.18 a gallon and in the U.S. Gulf at $2.28, data compiled by Bloomberg show. Prices sank 2 cents to $2.32 in New York and jumped 11 cents to $2.51 a gallon on the West Coast.

New York’s premium over Chicago narrowed 2 cents to 14 cents. The Gulf’s discount to the West Coast widened 11 cents to 23 cents.

--Editors: Richard Stubbe, Charlotte Porter