KANSAS CITY, Mo. - U.S. ethanol production slipped in the last week as profit margins narrowed and domestic demand waned, snapping a four-week rise in output.

The Energy Information Administration said on Wednesday that U.S. ethanol production totaled 899,000 barrels per day, down about 1 percent from 908,000 barrels per day the previous week. The weekly production of 6.293 million barrels is still the third-highest weekly output level over the last two months.

U.S. ethanol stocks dropped to 17.58 million barrels, down more than 3 percent from the previous week, the EIA said in its weekly petroleum report.

Domestic demand could be waning due to tight margins for blenders, though cooler weather that improves plant efficiency should have helped promote more production in the last week, according to Linn Group analyst Jerrod Kitt.

Profit margins for producers remained in the black, but were narrower, continuing a tightening trend seen over the last month.

Ethanol futures on the Chicago Board of Trade were flat to slightly higher on Wednesday, with the spot month up 0.012 cents to $2.813 per gallon.

(Reporting by Carey Gillam;editing by Sofina Mirza-Reid and Bob Burgdorfer)

Copyright 2011 Reuters Environmental Online Report

U.S. ethanol production drops, snaps 4-week rise
The Energy Information Administration said on Wednesday that U.S. ethanol production was down about 1 percent.