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U.S. Ethanol Extends Surge as Demand Outpaces Supply

July 5 (Bloomberg) -- U.S. ethanol prices extended a three- month rally to record levels as increased demand for the gasoline additive outpaced production.

Competition for ethanol between refiners and fuel companies soared after the additive was phased in as the primary blending component in cleaner-burning gasoline, and the use of a rival additive methyl tertiary butyl ether, known at MTBE, was reduced.

``The MTBE switch created an inordinate demand for ethanol,' said Sal Gilbertie, an energy trader for Fimat USA in New York. ``And the new plants aren't yet ready' to produce more.

U.S. ethanol averaged a record $3.9757 a gallon today, up 4.1 percent from $3.8194 since June 30, according to data compiled by Bloomberg. That average, based on ethanol traded in Des Moines and 29 other Midwest locations, was more than double $1.5929 a year ago and up 67 percent since the end of March.
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