Ethanol Declines as Supply Glut Outpaces Blending Demand

Source: Mario Parker • Bloomberg  • Posted: Monday, March 5, 2012

Ethanol futures declined in Chicago as supply outpaced demand for the biofuel.

Futures slipped following an Energy Department report that supply rose for an 11th consecutive week to a record 22 million barrels in the week ended Feb. 24. Production of conventional gasoline blended with ethanol, a proxy for blending beyond government requirements, climbed to 5.2 million barrels a day, the highest since Dec. 23.

“We’re blending as much as we can, but we’re still building stocks,” said Mike Blackford, a consultant with INTL FCStone in Des Moines, Iowa.

Denatured ethanol for March delivery fell 0.4 cent to $2.26 a gallon on the Chicago Board of Trade. Prices have gained 2.6 percent this year.

In cash market trading, ethanol in Chicago added 2.5 cents, or 1.1 percent, to $2.245 a gallon and in New York the additive decreased 1 cent to $2.30, according to data compiled by Bloomberg. Ethanol in the U.S. Gulf dropped 1 cent to $2.285 a gallon and on the West Coast the biofuel declined 0.5 cent to $2.345.

The U.S. is required to use 13.2 billion gallons of renewable fuels such as ethanol this year. Production (DOETFETH) at 896,000 barrels a day as of last week is equal to 13.7 billion gallons of the fuel on an annualized basis.