Nymex Gasoline Futures Rise on Ethanol Concern, Gain in Oil
2006-03-23 13:58 (New York)
By Robert Tuttle
March 23 (Bloomberg) -- Gasoline futures rose on concern
that U.S. supplies of the additive ethanol may not be sufficient
to meet rising demand in the months ahead. Prices also rose
following a gain in crude-oil futures.
Refineries are phasing out use of the additive MTBE, or
methyl tertiary butyl ether, and starting to produce gasoline to
be blended with ethanol. Production of ethanol may not rise fast
enough this year to meet demand, according to the U.S. Energy
Department.
``I don't frankly think that all of the additional ethanol
capacity is going to be available for all this blending'' in May
and June, said Andy Lipow, president of Houston consultant Lipow
Oil Associates LLC. ``The way the industry will solve this
problem, some people will go back to blending MTBE gasoline.''
Gasoline for April delivery rose 6.1 cents, or 3.5 percent,
to $1.7975 a gallon as of 1:45 p.m. on the New York Mercantile
Exchange. Prices are up 14 percent from a year ago.
Crude oil for May delivery increased $1.88, or 3 percent,
to $63.65 a barrel in New York. The futures are up 18 percent
from a year ago.
Ethanol will begin to replace MTBE in reformulated gasoline
after the Energy Policy Act of 2005 takes effect in May. The act
removes the requirement that oxygenates like MTBE be added to
gasoline. Many refiners say that requirement has shielded them
from lawsuits relating to MTBE, which has been linked to
groundwater contamination.
Ethanol Demand
Ethanol demand could reach 410,000 barrels a day by the
middle of 2006, Lipow wrote in a March 19 report, citing Energy
Department data. By the end of the year, ethanol production
capacity is expected reach about 400,000 barrels a day, he said.
``Where does that leave us this summer?'' Lipow wrote.
``Imports will fill some of the gap. But the balance between
ethanol supply and demand is really quite tight.''
April gasoline futures covering reformulated fuel to be
blended for use with ethanol, known as RBOB, fell 4.95 cents, or
2.6 percent, to settle at $1.848 a gallon in New York yesterday.
Use of the RBOB contract is rising as trading slows in the
current contract, which covers gasoline containing the additive
MTBE. Since Jan. 23, open interest in the current gasoline
contract has fallen about 22,000 and open interest in the RBOB
contract has risen by about 24,000, according to data compiled
by Bloomberg.
Heating oil futures for April delivery rose 3.74 cents, or
2.1 percent, to $1.7825 a gallon in New York. Prices are 16
percent higher than a year ago.
