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Ethanol’s Discount to Gasoline Narrows

June 24, 2013

Ethanol’s discount to gasoline tightened to the narrowest in more than two weeks on below- average inventories for this time of year.

The spread, or price difference, contracted 2.67 cents to 27.1 cents a gallon this morning, the least since June 5, as stockpiles of the fuel have remained near record-low seasonal levels throughout the year, data compiled by Bloomberg show. Inventories were down 22% last week from a year earlier, according to Energy Information Administration data.

"There’s good support in the market," said Shawn McCambridge, senior grain analyst at Jefferies Bache LLC in Chicago. "Stocks have stayed steady around these lower levels and that’s giving support."

Denatured ethanol for July delivery slipped 1.9 cents, or 0.8 percent, to $2.445 a gallon on the Chicago Board of Trade. Prices are up 12 percent this year.

Gasoline for July delivery sank 4.57 cents, or 1.7 percent, to $2.716 a gallon on the New York Mercantile Exchange. The contract covers reformulated gasoline, made to be blended with ethanol before delivery to filling stations.

McCambridge said ethanol prices were buoyed by a U.S. Supreme Court decision today that left intact Environmental Protection Agency rules allowing higher concentrations of corn-based ethanol in gasoline, turning away appeals from the grocery, auto and oil industries.

"That may have given us a little psychological support," McCambridge said. "It’s giving confirmation, just saying that’s not something we’ll have to worry about hanging over the market."

EPA Rule

The EPA in 2011 approved blends of as much as 15 percent of ethanol in gasoline, a formula known as E15, for cars made for the model year 2001 and later.

"Now that the final word has been issued, I hope that oil companies will begin to work with biofuel producers to help bring new blends into the marketplace that allow for consumer choice and savings," said Tom Buis, chief executive officer of Growth Energy, a renewable fuels trade group.

Ethanol-blended gasoline made up about 94 percent of the total U.S. gasoline pool in the week ended June 14, data from the Energy Department’s analytical arm show.

Corn for July delivery decreased 8.25 cents to $6.535 a bushel in Chicago. The corn crush spread, or the cost difference between a gallon of ethanol and the corn needed to make it, was 6 cents at 11:50 a.m., up 1 cent from June 21, data compiled by Bloomberg show.

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RELATED TOPICS: Biofuels, Energy, Ethanol

 
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