Ethanol Blog

Ethanol futures rallied higher following underlying buying in both corn and RBOB gasoline futures trade Thursday. Many factors seemed to be tied together on Thursday which led to the aggressive market rally, each of them making the market shift even more interesting.

RBOB gasoline futures continues to rally higher as concerns continue to grow about supply concerns and refinery shutdowns associated with Tropical Depression Harvey, which first made land as a Category 4 hurricane, and the damage done to these refineries and the flooding associated with it.

This impact is not yet fully known, but the more that is known, the more extensive the damage is expected to be. This is the reason that price spikes seem to grow each trading session.

With the end of the August comes short covering, allowing traders to square positions, and many are going to err on the high side if they are going to err. This is what led to a 25-cent RBOB gasoline rally Thursday. End-of-the-month short covering also is one of the main themes of the 12-cent rally in the corn market following a two-week and 20-cent market slide to end August.

Remember, there is just one trading day until the long Labor Day holiday weekend. How many commercial traders and investment traders are actually coming back to work Friday? All of this led to an aggressive 5.8-cent rally in September ethanol contracts Thursday afternoon before traders left the market. It is expected that this will lead to greater volatility through the upcoming weeks that will create even more market shifts and market drama.

Rick Kment can be reached at rick.kment@dtn.com

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