Oil Report

U.S. daily ethanol production rose in February

NEW YORK, April 30 (Reuters) - U.S. daily ethanol output rose in February but with weak motor fuel demand much of the fuel went into spare inventories, the government said on Thursday.

Daily U.S. ethanol production rose about 17,000 barrels per day, or nearly 3 percent, to 647,000 barrels per day in February, the last month for which data was available, the Energy Information Administration said in a monthly supply report.

U.S. ethanol industry capacity jumped about 60 percent last year amid generous government incentives. But about 20 percent of that capacity has been idled due to poor to negative margins for making the alternative motor fuel.

The low margins, the credit crunch and volatile prices for corn, the main input cost for U.S. ethanol makers, have forced several companies to file for Chapter 11 bankruptcy protection.

Motorists have also driven less during the recession, which has cut fuel demand and hurt profits. About 7 percent of the motor fuel burned in the United States is ethanol.

U.S. inventories of ethanol in February rose about 1.5 million barrels to 15.688 million barrels, the EIA said. (Reporting by Timothy Gardner; Editing by Christian Wiessner)