Ethanol Plunges to Three-Month Low on Ample Supply and Economy

Source: By Mario Parker, Bloomberg • Posted: Thursday, September 27, 2012

Ethanol fell to a three-month low on mounting concern that a global economic slowdown will reduce demand for the biofuel.

Futures moved lower with crude oil and corn as protests in Spain and Greece erupted over the region’s austerity measures. Separately, the Energy Department said total U.S. fuel use decreased 1.1 percent in the four weeks ended Sept. 21.

“All the markets seem to be down,” said Dan Flynn, a trader at Price Futures Group in Chicago. “There’s not too much positive news. We’re down hard on crude and the grains.”

Denatured ethanol for October delivery fell 3.6 cents, or 1.6 percent, to $2.227 a gallon on the Chicago Board of Trade, the lowest settlement since June 28. Futures have gained 1.1 percent this year.

In cash market trading, ethanol on the West Coast dropped 4 cents, or 1.7 percent, to $2.34 a gallon and in the U.S. Gulf the additive decreased 1 cent, or 0.4 percent, to $2.295, data compiled by Bloomberg shows.

Ethanol in Chicago decreased 1 cent, or 0.5 percent, to $2.235 a gallon and in New York the biofuel gained 1 cent, or 0.4 percent, to $2.30.

Prices also plunged after the Energy Department reported stockpiles of the fuel were 19.3 million barrels last week, up 11 percent from a year earlier. Imports averaged 72,000 barrels a day, 24 percent higher than a week earlier, up from 17,000 a year ago and the third-highest level of 2012

Crude, Gasoline

Crude for November delivery fell $1.39, or 1.5 percent, to $89.98 a barrel on the New York Mercantile Exchange, the lowest settlement since Aug. 2.

Gasoline for October delivery surged 11.4 cents, or 3.8 percent, to $3.0811 a gallon in New York. The contract covers reformulated gasoline, which is made to be blended with ethanol before delivery to filling stations.

Gasoline stretched its premium to ethanol to 85.41 cents from 70.41 yesterday, the highest since May 29, spurred by speculation that supplies of the motor fuel on the East Coast may tighten after an explosion at Irving Oil Corp.’s New Brunswick refinery.

Corn for December delivery dropped 19 cents, or 2.6 percent, to settle at $7.2475 a bushel in Chicago. One bushel makes at least 2.75 gallons of ethanol.