Ethanol’s Discount To Gasoline Widens Below-Average Inventory

Ethanol strengthened against gasoline a day after a U.S. Energy Information Administration reported record low inventory for this time of year.

The spread tightened 3.38 cents to 46.82 cents a gallon as the Energy Department’s analytical arm said stockpiles of the fuel rose 0.2 percent to 17.5 million barrels in late-March, from the lowest level since the week ended December 9, 2011. Inventories are 22 percent lower than a year ago.

"There’s a lot of demand in the front for prompt product," said Jim Damask, Manager at StarFuels Inc. in Jupiter, FL. "They must be ripping right through supply."

Denatured ethanol for May delivery rose 1.3 cents, or 0.5 percent, to $2.425 a gallon on the Chicago Board of Trade. Gasoline futures for May delivery dropped 2.08 cents, or 0.7 percent, to $2.8932 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 companies have tempered production 7.6 percent to 807,000 barrels a day from a year earlier, before the worst drought since the 1930s sent corn prices to a record high and eroded returns for making the fuel.

Corn prices plunged 13 percent after a March 28 Agriculture Department report showed domestic inventories on March 1 totaled 5.399 billion bushels, exceeding analysts’ estimates of 4.995 billion. Corn for May delivery fell 1.25 cents to $6.4025 a bushel in Chicago. Prices on April 2 fell to $6.405, the lowest settlement since June.

Under the Renewable Fuels Standard, the U.S. is required to use 13.8 billion gallons of ethanol this year and 14.4 billion in 2014. Ethanol-blended gasoline made up 92 percent of the total U.S. gasoline pool, the least since February 22, the EIA said. That’s down from a record 95 percent in the week ended March 15.

Imports of the fuel averaged 49,000 barrels a day in early-April, the highest level since January 18 and up from 9,000 barrels a year earlier, EIA said.

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