Ethanol Tumbles After Stockpiles Jump to Highest Since September

Jan 08, 2014 4:17 pm ET

Jan. 8 (Bloomberg) -- Ethanol tumbled after a government report showed stockpiles of the biofuel reached the highest level since September.

Futures fell 1.6 percent after the Energy Information Administration said inventories jumped 3.6 percent to 16 million barrels in the week ended Jan. 3, the biggest gain since July 19 and the most since Sept. 13. Output also increased.

“We saw it drop after the numbers came out,” said Jim Damask, a manager at StarFuels Inc. in Jupiter, Florida. “Production was up and supply was up.”

Denatured ethanol for February delivery tumbled 3.1 cents to $1.913 a gallon on the Chicago Board of Trade. Prices have fallen 14 percent in the past year.

Gasoline for February delivery slid 2.23 cents, or 0.8 percent, to $2.6563 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’s discount to the motor fuel widened 0.87 cents to 74.33 cents.

Production of the additive climbed 0.7 percent to 919,000 barrels a day, snapping a three-week string of declines, data from the Energy Department’s statistical arm showed.

Ethanol refinery and blender inputs, a measure of demand, sank 6.4 percent to the lowest level in a year, according to the report.

Milder Weather

Prices also declined after Kinder Morgan Inc. said it lifted force majeure at its Chicago and Argo, Illinois, ethanol terminals as frigid weather has subsided.

Corn for March delivery fell 9 cents, or 2.1 percent, to $4.17 a bushel in Chicago. One bushel makes at least 2.75 gallons of the fuel. The corn crush spread, or the difference between the cost of corn and the price of ethanol, was 32 cents, up from 31 cents yesterday, data compiled by Bloomberg show.

Prices plummeted on the spot market, data compiled by Bloomberg show. Ethanol fell 13 cents to $2.35 a gallon in New York, 7.5 cents to $2.17 in Chicago, 17.5 cents to $2.35 on the Gulf Coast and 1.5 cents to $2.60 on the West Coast.

New York’s premium to Chicago narrowed 5.5 cents to 18 cents, while the Gulf’s discount to the West Coast widened 16 cents to 25 cents.

The U.S. assures compliance with ethanol consumption mandates with Renewable Identification Numbers, tracking certificates attached to each gallon of biofuel and that can be traded among refiners.

Corn-based ethanol RINs for 2014 were unchanged at 30 cents and 2013 RINs held at 31 cents, data compiled by Bloomberg show.

--Editors: Richard Stubbe, Charlotte Porter