Ethanol production credit prices were unchanged on Thursday, as the increase of actual physical blending was cutting back on buying of Renewable Identification Numbers (RINs), traders said.

Some blenders and refiners are using physical ethanol to blend into gasoline rather buy RINs, essentially credits that fuel companies use to prove they have satisfied the ethanol production mandate. Levels have surged this summer as a drought-stricken corn crop raised questions about whether ethanol producers would make enough of the corn-based fuel for oil companies to meet their quotas.

Ethanol was selling at a 34-cents a gallon discount to conventional gasoline in the Midwest, making it more economically attractive to use.

"There is more blending so there is less buying in the market," said one RINs trader.

For the week, the benchmark E12 RINs have lost about 7 percent of their value.

RINs allows every gallon of ethanol and renewable fuel produced in the United States to be tracked to ensure compliance with the Renewable Fuel Standard Act by obligated parties such as refiners and blenders.

Obligated parties are able to buy or trade RINs to meet their quotas, which now is 10 percent of their gasoline production.

E12 RINs, referring to ethanol RINs produced in 2012, traded at 4.30 cents a gallon, in line with Wednesday's level before slipping to talk at 4.20/4.25 cents a gallon, traders said.

For the week, the benchmark E12 RINs have lost about 7 percent of their value.

On Friday, the U.S. Department of Agriculture slashed corn crop estimates to the lowest level in six years. Less corn will be used in making ethanol due to the drought, the agency said.

The price of RINs is still much higher than in early July when E12 RINs were trading at 1.85 cents a gallon at the beginning of the drought.

Refiners and blenders are also able to buy unused RINs from the previous year and the upcoming calendar year.

E11 RINs held at Wednesday's level of 60 points a gallon.

E13 RINs traded at 7.20 cents a gallon, below earlier week levels of 7.50/8.00 cents a gallon.

According to recent analyst estimates, nearly 3.5 billion gallons worth of 2011 RINs have not yet been used, of which about 2.6 billion are eligible for use against this year's 13.2 billion gallon renewable fuel target.

Trade in biomass-based diesel RINs was at 95 cents/$1.03 a gallon, down from Wednesday's trade level of $1.04 a gallon.

Advanced biodiesel RINs, D5, were bid/asked at 45/49 points a gallon, unchanged from Wednesday.

Imports of ethanol rose to 93,000 barrels per day from 74,000 bpd a week earlier, according to government data.

Last week, U.S. gasoline demand rose to 9.3 million bpd, with 847,000 bpd of ethanol, or 9.1 percent, blended into gasoline, according to weekly data from the EIA.

Corn futures settled at $7.97-3/4 a bushel, up $3-3/4. On Friday, corn prices reached a new high of $8.43 a bushel after the USDA announcement of the diminished crop.

The spread between ethanol futures to gasoline widened to 50 cents in favor of gasoline, out from 40.2 cents last week. (Reporting by Janet McGurty; Editing by Marguerita Choy)