Ethanol prices soften despite gasoline rally

Ethanol Report
By Rick Kment | April 01, 2013

Feb. 25—The month of February was characterized by a strong surge in gasoline price levels. Gasoline prices in some areas of the country were nearing $4 per gallon, with expected spring and summer demand spiking additional interest in the market. With this trend, prices surged over 50 cents per gallon since posting the seasonal low in December. At the same time, ethanol futures prices remained flat. Typically, gasoline prices do not rise this quickly nor see spikes this early in the year. Aggressive buying activity in gasoline markets came as overall inventory levels ran well above last year’s levels. 

In most of the market, however, the focus was on aggressive demand support through the next couple of months. Even though the market is still showing signs of strong seasonal price shifts, the most recent moves in the market have put prices under pressure as concerns grow that the higher prices may squelch demand. Any demand losses will not only be damaging for the RBOB gasoline market through the rest of the spring and summer, but will also create additional challenges for the ethanol market. Ethanol stocks still remain strong, but have been aggressively reducing the glut seen over the past year. Strong gasoline demand through the spring and summer is needed to keep the ethanol market firm.