Ethanol Blog

Post Labor Day Blues

Rick Kment
By  Rick Kment , DTN Analyst

When traders returned to the market Tuesday following the long holiday weekend, they were met by concerns of shrinking post-summer driving demand. RBOB gasoline and crude oil prices posted the most significant market shifts, while front-month ethanol contracts trended lower due to follow-through market pressure. The 7-cent-per-gallon losses in nearby RBOB gasoline futures focused on expected growth to continue in supplies while demand is expected to take a more seasonal approach and trend lower starting this week. This could create some additional widespread liquidation through nearby energy markets and could limit both commercial and investment buyer activity through the next couple weeks. Ethanol markets seemed to be more insulated to the shift, as front-month September futures fell 2.8 cents per gallon, while all other nearby contracts posted a slim fractional gain. But it is important to point out that the declining demand has already been factored into the ethanol markets with October contracts already holding a sizable double-digit discount to the spot month contract. Deferred contracts are carrying an even wider discount as these season trends have held through much of the summer. Given the concern of further demand erosion through the upcoming months, additional price pressure is likely to develop as the week continues.

(ES)

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