What Is RBOB Gas? Leave a comment
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For example, since many of the refineries for gasoline are located in the U.S. Gulf Coast region, weather issues in that area can drive up the price for RBOB. Another important factor to consider is that gasoline is heavily taxed in many jurisdictions. Oil refineries separate out the different chains by heating the crude oil to different vaporization points, and then distilling the resulting vapors. Gasoline is a mixture of those hydrocarbon chains with boiling points below that of water. These different chains are blended together in various proportions to provide a consistent product for motor fuel.
The weekly chart of the RBOB Brent crack spread shows that at times the crack was as high as $28 dollars per barrel and as low as -$5.5 per barrel. When the crack spread is negative there is no incentive for refiners to purchase and refine Brent oil. This generally occurs during a recession or Brent oil is artificially buoyed by supply disruptions.
Fuel ethanol production (million barrels per day)
Fluctuations in global demand and how refineries respond to changes in demand can materially affect gasoline prices. Crack spreads are a way to measure the margins for refining crude products and can serve to predict how tight the supply of products is in different markets. I do believe that oil production globally has peaked at 85 million barrels. Demand for distillates such as gasoline is driving higher global demand for crude oil. In the view of many analysts, growing demand for crude combined with strains on refining capacity could drive gasoline prices higher. The value of a CFD is the difference between the price of gasoline at the time of purchase and the current price.
Gasoline Basics
Certain options strategies, like vertical spreads, have predefined profits and losses. 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.
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CFD traders, therefore, have direct economic exposure to the commodity. Futures are a derivative instrument through which traders make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions. An important factor to understand about gasoline is its octane rating. Internal combustion engines, like those found in automobiles, burn fuel in controlled processes.
Options are also a derivative instrument that employ leverage to trade in commodities. RBOB is more expensive to refine—more energy and more effort are required to pull some of the additional hydrocarbons out of the fuel. Producing reformulated gasoline using ethanol presents problems for refiners.
Much of the U.S. gasoline supply comes from refineries in colmex pro forex broker review the Gulf Coast region. 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. Increasing demand for gasoline in Asia, Latin America and the Middle East often outpaces supply from those regions. Demand for gasoline has been steadily declining in Europe and the United States. Now let’s look at the import volume for the CBOB for the rest of PADD 1 that does not require the reformulation.
- RBOB Gasoline futures are traded on the Chicago Mercantile Exchange, with prices quoted in U.S. dollars and cents per gallon under the symbol RB.
- You should consider whether you can afford to take the high risk of losing your money.
- Gulf Coast region, weather issues in that area can drive up the price for RBOB.
- Mandated by the EPA, ethanol is the leading oxygenate added to gasoline in the United States.
One of the earliest biotechnologies employed by man, the fermentation of sugar into ethanol, has been with us since prehistory. The alcohol in wine, beer, and that fine single-malt scotch is the same ethanol that is blended into our gasoline. Because gasoline produces carbon emissions, many countries are finding ways to incentivize less consumption. If countries phase out gasoline or tax it very heavily, then demand Stop-loss could plummet.
Exploration and reserves, storage, imports and exports, production, prices, sales. The chart above shows the weekly average import volume, in thousands of barrels, of RBOB (with special blending components for blending with ethanol) into the PADD 1—Northeast area. Do you notice that there are no imports prior to the middle of 2004? At this point, the gasoline that comes out of the refinery is not a finished product. In the technical language of the industry, it is a blending component, or a blendstock. Mandated by the EPA, ethanol is the leading oxygenate added to gasoline in the United States.
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The second is the difference between the cost to generate gasoline and the price where gasoline can be sold is the profit margin. The cost to generate gasoline is the value of crude oil plus the distillation process. A popular way to trade in gasoline is through the use of Contracts for Difference (CFDs) derivative instrument. CFDs allow traders to speculate on RBOB gasoline prices without purchasing ETFs, futures, options or shares of oil companies. RBOB Gasoline futures are traded on the Chicago Mercantile Exchange, 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.
RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”. This type of gasoline is used as the benchmark for gasoline trading on the Chicago Mercantile Exchange. The term “reformulated” what is a white-label broker in forex describes gasoline that does not have any MTBE “Methyl tert-butyl ether”. Reserves, production, prices, employment and productivity, distribution, stocks, imports and exports.
Listed contracts conduct trading throughout the next 36 consecutive months. As mentioned above, gasoline is a natural by-product of crude oil. For every three barrels of crude oil refined, approximately two barrels of gasoline can be salvaged. Refining this essential fuel can be done in a variety of ways, with the most popular being forms of “cracking”. 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.
Each fraction has molecule chains of different lengths, and each of these chains has a different boiling point. The spread between Brent and WTI has been as high at $28 per barrel and as low as -$3.6 per barrel. When the spread is elevated there is an incentive for US refiners to purchase WTI over Brent. Short, timely articles with graphics on energy, facts, issues, and trends.
