Ethanol Stocks Perk Up On OPEC Cut, Production Hopes

The current status of the ethanol sector may not be sizzling, but it sure isn’t dead. Ethanol stocks this week have performed reminiscent of the good old days.

The cumulative affect of Pacific Ethanol's first plant being complete and OPEC’s decision, though still undecided, in cutting an output of 1 million barrels of oil a day has given the ethanol sector a strong bullish push.

As a result, majority of the ethanol stocks are up big and volume for all has significantly increased. It is obligatory though to carefully track the decline in crude oil prices (sold today near its 2006 low of $58 a barrel) as it can quickly turn ethanol’s optimism into pessimism. There is some reassurance though due to OPEC's proposition, as Gordon Kwan of CLSA puts it “If [crude oil] prices remain at this level there's still not much motivation to cut, but if prices keep falling rapidly they will want to pre-empt that." OPEC will help investors by essentially price flooring crude oil. So how much will OPEC's impact raise the price of Crude Oil? Can ethanol companies systematically publish optimistic news? Both of these questions will be deciding factors in Ethanol's sustainability.

So how impressive have ethanol stocks been this week? Lets take a look:

Comments

[NO DooDahs:]

Good short opp for those so inclined. ADM is actually a company that has value, I would exclude it from that comment. The others are fundamentally garbage and should be traded on technicals only.

Nice inclusion of penny stocks. How liquid are those? Could I move the market in them with mom's IRA?

2006 Oct 13 10:21 AM

[Sidney Will...:]

ADM is worth a small part of one's investment ideas. The others mentioned will be consolidated, because they are underfunded. Something might emerge over time that incorporates some of the assets of the new plants at a nickel on the dollar and finally have some reasonable expectation of success.

2006 Oct 14 10:10 PM