Energy is on a bull run as crude oil futures hit a 17-month high earlier this week before retreating.
According to Bloomberg, crude futures rose to levels not seen since July 2015. Bloomberg credits the rise to the Organization of Petroleum Exporting’s (OPEC) promises to curb production early next year, something that hasn’t been done since 2008.
OPEC’s oil cut isn’t the only pledge as Saudi Arabia’s prime minister says he’ll go beyond OPEC’s commitments. Russia is also vying to reduce production as well, adding strength to the crude market.
Some analysts aren’t convinced the cutback will last.
“The history of these cuts staying in place is really bad,” said Ted Seifried of Zaner Ag Hedge. “Someone will go against the grain and then the thing will fall apart. The chances of that happening are fairly good. So, if that were to happen and crude oil prices were to come back down again ,that does good things for ethanol in the sense of the blend, but it doesn’t bode well for E-85 demand as an alternative to regular unleaded gasoline.”
Seifried believes crude prices could soften and hopes ethanol profit margins stay up.