Ethanol Blog

Ethanol Price Premium Hard to Maintain

Rick Kment
By  Rick Kment , DTN Analyst

The moderate-to-strong price premium of ethanol futures contracts over the RBOB gasoline market has held for one week, so far, and continues to maintain a 7-cent premium. But growing pressure is developing in ethanol prices early in the week as traders start to get weary concerning the higher price of ethanol compared to gasoline.

Both RBOB gasoline markets and crude oil futures continue to see moderate-to-strong pressure day after day. This makes it very hard for ethanol contracts to keep up with the recent support in the corn market which increases production costs. The ethanol market typically follows corn prices higher to a point, but the ability to hold ethanol prices over the RBOB gasoline is usually short lived and based more on supply issues than long-term demand fundamentals.

This is starting to be seen once again through the middle of January as ethanol prices move lower at a much faster pace Monday than the RBOB gasoline market. Without any significant inventory announcements through the next two weeks, it is expected that ethanol prices will continue to erode the current price premium to the RBOB gasoline market through the end of the month.

Rick Kment can be reached at rick.kment@dtn.com

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