Home Energy Gasoline Prices Influence Ethanol Market Direction

Gasoline Prices Influence Ethanol Market Direction

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Ethanol supplies are becoming much more manageable at the end of the year. This has lessened concern about gaining access to needed gallons and sparked aggressive price pressure in all ethanol markets. Ethanol futures prices have fallen 64 cents per gallon over the last month. This has buyers, sellers and analysts looking away from the corn market and more at RBOB gasoline and energy market moves. 

 

Currently spot month ethanol prices are still holding an 8 cent premium to the spot RBOB gasoline contract. This relationship is likely to erode after the first of the year, as demand for ethanol will start to lessen if ethanol supplies are not priced under gasoline market prices in the long term. Given the current softness in gasoline prices, ethanol prices could see additional declines over the next several weeks.