Ethanol Extends Weekly Decline to 11% on Senate Bill

Source: By Lucia Kassai, Bloomberg • Posted: Monday, December 16, 2013

Ethanol futures fell in Chicago, capping a second straight weekly drop, on concern a requirement to blend corn-based ethanol with gasoline will be eliminated, while U.S. production climbed to a 23-month high.

The biofuel slipped 11 percent this week. U.S. Senators Dianne Feinstein from California and Tom Coburn from Oklahoma introduced a bill yesterday to remove the requirement from the federal Renewable Fuel Standard, Bloomberg BNA reported. Ethanol output in the U.S. rose to 944,000 barrels a day in the week ended Dec. 6, according to a Dec. 11 Energy Information Administration report.

“You have a bipartisan legislation introduced to the Senate which would eliminate corn ethanol from the RFS mandate completely, and carryover from the bearish EIA report,” said Sean Wever, a biofuels broker at Green Key Markets LLC. “The bear has a lot of talking points right now.”

Denatured ethanol for January delivery dropped 6.5 cents, or 3.6 percent, to settle at $1.765 a gallon, on the Chicago Board of Trade, the fourth consecutive decline. Prices have dropped 19 percent this year.

Gasoline for January delivery retreated 0.55 cent to $2.6293 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 gasoline widened 5.95 cents to 86.43 cents a gallon.

Corn Futures

Corn for December delivery fell 7.75 cents, or 1.8 percent, to $4.205 a bushel in Chicago. The contract expired today. The more actively traded March contract declined 8.75 cents to $4.255. One bushel makes at least 2.75 gallons of the renewable fuel.

The corn crush spread, or the difference between a gallon of ethanol and the corn needed to make it, was 5 cents based on March contracts, unchanged from yesterday, data compiled by Bloomberg show.

The Renewable Fuel Standard requires that 13.8 billion gallons, or about 900,000 barrels a day, of conventional corn ethanol to be blended into gasoline this year.

Consumption is tracked by Renewable Identification Numbers, certificates attached to each gallon of ethanol that are submitted to the Environmental Protection Agency and that can also be traded among refiners.

Corn-based ethanol RINS were unchanged at 28 cents and advanced RINs, which cover biodiesel and Brazilian sugarcane-based ethanol were unchanged at 29 cents, data compiled by Bloomberg show.

Tumbling Cash

In cash market trading, ethanol tumbled 37.5 cents to $2.375 a gallon in New York, 23 cents to $2.07 in Chicago, 23 cents to $2.17 on the Gulf Coast and 17.5 cents to $2.35 on the West Coast, according to data compiled by Bloomberg.

Chicago’s discount to New York narrowed 14.5 cents to 30.5 cents. The West Coast’s premium over the Gulf stretched 5.5 cents to 18 cents.

Stockpiles along the East Coast last week jumped 3.8 percent to 4.9 million barrels, from a record low the previous week, data show from the EIA, the Energy Department’s analytical arm.

Prices in New York Harbor reached $3.60 a gallon on Dec. 6, the highest level since July 2006.

The higher production rates helped U.S. inventories rise 2.1 percent to 15.4 million barrels, the biggest weekly jump since July 19, the highest level since Oct. 18 and the first back-to-back gain since October, EIA data show.