What is RBOB Gasoline? A CommodityHQ com Guide

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor https://www.day-trading.info/u-s-treasury-bonds-bills-and-notes/ accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.

  1. The figures below represent global consumption and production of crude oil, of which gasoline is derived.
  2. Fortunately, traders can evaluate refiners profits by analyzing the margins they produce.
  3. This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote.

If a position is not liquidated, the holder of a long contract might be responsible for taking delivery of 42,000 gallons of gasoline. It is safe to say that most investors do not want to take physical delivery of that much gas. Thus, investors must be aware of the different deadlines for futures contracts and offset any positions before the risk of delivery comes into play.

Edwin Drake, the first American to drill for oil, discovered gasoline by accident when he was distilling oil to make kerosene for heating. Drake considered gasoline a useless byproduct of the distillation process and discarded it. There isn’t an easy way to invest directly in RBOB gas with stocks or bonds, but you can invest in energy sector stocks and bonds affected by the same economic forces. There are also options for energy-related ETFs focused on oil and natural gas.

The Elements of a RBOB Contract

Cracking is a process whereby hydrocarbon molecules are broken up by heat and pressure into lighter molecules. There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking. Other production/refining methods include polymerization, alkylation, and isomerization. Gasoline itself was not invented, but rather was discovered as a by-product of the production of kerosene and the refining of crude oil. It was thrust into popularity with the introduction of automobiles, which had the option of using various fuel sources, but ultimately settled upon gasoline for its strong combustion properties. Since then, numerous developments have improved the quality of gasoline as it is refined from crude oil all over the world.

As a result, weather events or supply congestion in that area can cause short-term delays or price spikes. RBOB is Reformulated Blendstock for Oxygenated Blending, a mix of petrochemicals intended to be mixed with ethanol to produce finished motor gasoline. Additionally, RBOB price changes lag a few days behind the price you pay at the gas station. So, keeping an eye on RBOB prices can give you a sense of where retail gas prices are headed.

The price for the RBOB gasoline futures contract is quoted in U.S. dollars and cents. The minimum price tick for RBOB is 0.0001, equivalent to a movement of $4.20 for one contract. RBOB Gasoline futures are traded on the Chicago Mercantile Exchange, https://www.topforexnews.org/brokers/swissquote-review-is-a-scam-or-legit-forex-broker/ with prices quoted in U.S. dollars and cents per gallon under the symbol RB. A single contract represents 42,000 gallons with a minimum fluctuation of $0.0001 per gallon. Listed contracts conduct trading throughout the next 36 consecutive months.

ETFs for Risk Reduction in Your Portfolio

The RBOB / Brent crack spread describes the difference between the price of RBOB gasoline and the price of Brent crude oil. RBOB Gasoline is quoted in US cents per gallon and Brent crude oil is quoted in US dollars per barrel. To generate an “apples to apples” comparison, the crack is quoted in US dollars per barrel. To create this quote, RBOB gasoline is converted into US dollars per barrel. This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote. You can then subtract the price of Brent crude oil from the price of RBOB gasoline to derive the crack spread.

Factors Affecting Natural Gas Prices

The term crack spread describes the difference between the value of gasoline and crude oil. This activity is known as the downstream british pound sterling to australian dollar exchange rate process of oil and gas companies. In the refining process, crude oil is heated and introduced into the distillation tower.

Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline is a fuel product made from refined crude oil. RBOB gasoline often goes by the names gasoline, petro gasoline or petrol. RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”.

For example, hurricane weather in the Gulf of Mexico can have a big impact on RBOB’s price because it affects the supply produced by the many U.S. refineries in the gulf. Drivers use more gas in the summer, which also affects the price because of the increase in demand. Fluctuations in global demand and how refineries respond to changes in demand can materially affect gasoline prices. Turmoil in important oil-producing countries can create spikes in gasoline prices. In the past, Middle East wars, oil embargos, political coups and acts of terrorism have created fears of supply disruptions and higher prices.

Prices for RBOB gasoline futures logically have a high degree of correlation with crude oil since gasoline is distilled from crude. Thus, some of the global supply and demand factors for crude oil also apply to RBOB. From an investing perspective, RBOB gas is important because it’s the benchmark for gasoline futures. So this may give you some insight into what retail gas prices will be in a few days.

Leave a Reply

Your email address will not be published. Required fields are marked *