Within the last month, the price spread between the RBOB gasoline and ethanol futures market has doubled. RBOB gasoline futures have gone from a 36-cent-per-gallon premium over the ethanol market to a 78-cent-per-gallon premium. This support is twofold, coming from strong demand support in the gasoline market as buyers are focusing on potential spring and summer demand, and the recent pressure in the corn market weighing on ethanol price levels.
Thursday posted a wide shift in prices, where the spread increased by 11 cents in one session. The expectation that additional ethanol production is coming back on line through the spring months ahead of the summer driving season and expected inventory pull down of gasoline stocks.
There is growing interest in the overall demand growth through the next couple of months, and this could widen the price spread over the near future even wider than the current 78-cent-per gallon levels.
Rick Kment can be reached at email@example.com
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