The start of the holiday week has created further market pressure for the ethanol market, but also the entire energy complex, with front-month January ethanol futures leading the complex lower.
January futures fell 1.6 cents per gallon, moving to $1.383 per gallon. Even though the complex is still above long-term support levels, there still remains the concern that additional weakness will develop through the first quarter of 2016 when demand for product remains the weakest.
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RBOB gasoline futures became the biggest impact in the falling ethanol market Monday with sharp losses of 5 to 6 cents per gallon quickly flooding the complex as traders quickly try to find a sense of market support, given extremely light trade volume and very little short-term market direction over the next several weeks.
The potential that front-month January contracts will take out August lows before contracts expire is a strong possibility and could spark widespread liquidation through the next several trading sessions. Demand for the holiday season is expected to remain strong, but this has already been factored into the market, and is not likely to become a significant factor in the market over the next two weeks, although building crude oil supplies continue to drag the market lower, causing concern by many traders of further long-term market weakness.
Rick Kment can be reached at firstname.lastname@example.org
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