Commodities: Energy, ethanol prices continue dropping sharply

Ethanol and gasoline prices have seen sharp losses over the first few weeks of 2015, as any support attributed to holiday travel demand has disappeared and additional support is hard to find. Ethanol futures held a strong premium to the gasoline market through December and early January, but growing supplies and increased production levels due to plentiful corn stocks quickly eroded that support.

Weakness in gasoline markets comes as world supplies of crude oil continue to climb sharply and uncertainty about global economic security is keeping both commercial and investment buyers cautious about stepping back into energy markets. With crude oil futures hovering below $50 per barrel, it is uncertain just how much further prices will move over the next few weeks. However, it appears it may be even harder to draw active support back into the market over the short term. Prices could see some additional marginal losses, but at some point, production levels will start to decline, especially where margins are becoming increasingly narrow.