Ethanol Blog

Ethanol to Gasoline Discount Slipping

Rick Kment
By  Rick Kment , DTN Analyst

At the end of the week, ethanol futures are holding a 38-cents-per-gallon discount to front-month RBOB gasoline futures. This has moved lower over the last two weeks, where the discount neared 45 cents per gallon at the end of April.

Although traders continue to focus on the ability to draw additional demand into the entire energy market and growing consumer needs for gasoline through the next month should help to push prices higher, ethanol markets are showing steady support, which may help to spark additional long term buying.

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The ethanol market inventory levels still remain significantly above year-ago levels, but the recent pullback in ethanol production, as well the expectation that strong demand will be seen through the last half of May, could continue to draw prices higher and likely narrow the price spread moderately.

It is unexpected that the entire discount will disappear, but it is very likely that if overall ethanol production remains limited, ethanol futures could spend the first part of the summer between 25 to 35 cents per gallon below RBOB gasoline futures prices.

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

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