Ethanol futures continue to march higher Tuesday afternoon, with prices 5 to 6 cents per gallon higher at closing bell. This recent surge in the ethanol market is taking the market by surprise, as corn futures which posted sharp gains through much of the session closed slightly higher in the September contract month.
August ethanol futures are now in striking distance of $3 per gallon, closing at $2.911 per gallon. This is the highest close in the ethanol market since 2008, and is now fewer than 3 cents per gallon under the 2008 market high. The price spread between ethanol futures and RBOB gasoline markets continues to erode during the last two weeks.
August ethanol futures are trading 20 cents below the August RBOB gasoline contract. Demand for ethanol continues to remain strong, with active consumer driving demand holding after the Independence Day holiday and ethanol traders still concerned about future production and shipments of ethanol being enough to satisfy current and expected short-term demand across the country.
Spot month ethanol futures are starting to be directed by current ethanol supplies and demand for the time being, rather than closely keeping pace with corn price moves. Ethanol futures are 13 cents higher than prices set the second week of June, when corn futures prices topped out at $7.87 per bushel, compared to a current corn price of $6.98 per bushel. The current support in the ethanol market is taking current and future demand into account, leading to active trade through mid-July.
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