Seasonal Demand Sparks Price Rally in Ethanol

Source: By Rick Kment, DTN • Posted: Tuesday, May 24, 2016

Strong gains developed in ethanol and RBOB gasoline markets through the month of May as firm buyer support keep corn futures near $4 per bushel in front-month contracts, while the summer driving season nears. The Memorial Day holiday is typically the start of the summer vacation season and indicates when holiday travel begins.

Prices for gasoline and ethanol have rallied 8 to 10 cents per gallon in front-month futures contracts during the last month in anticipation of growing demand and tightening supplies. The stronger demand is causing inventory levels of both gasoline and ethanol to move back to much more manageable levels than seen earlier in the year.

If these levels hold, firm price support is expected to continue throughout early summer. Ethanol markets are not an isolated island though, as strength in the crude oil market and in world economies unifies solid support through the entire energy complex, allowing widespread market support to develop through the end of spring.

Gasoline Prices (By Region)
REGION SPOT RACK
West Coast $1.5460 $1.9845
Midwest $1.7826 $1.6013
East Coast $1.5326 $1.6401
Front Month Futures Price (RBOB) $1.6350
Ethanol Prices (By Region)
REGION SPOT RACK
West Coast $1.7550 $1.8500
Midwest $1.6000 $1.7675
East Coast $1.6800 $1.8510
Front Month Futures Price (AC) $1.6040

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