4 Factors You Didn’t Know About RBOB

In the refining process, crude oil is heated and introduced into the distillation tower. Liquids and gases are separated into components by weight and boiling point. The lightest components, such as gasoline rise to the top while the heaviest components, such as residual oil, fall to the bottom. Light components include gasoline, which is condensed from a gas back into a liquid. Reformulated blendstock for oxygenate blending (RBOB) is a grade of gasoline used in U.S. futures contracts traded on commodity exchanges as a way to speculate on the price of oil. RBOB (Reformulated Blendstock for Oxygenate Blending) is a specially produced reformulated gasoline blendstock intended for blending with oxygenates downstream of the refinery where it was produced.

Gasoline Trading Guide: What Is Gasoline and How to Trade It

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? Ethanol needs to be mixed into gasoline at the local terminal racks, just before it’s white label crypto exchange software delivered. The ethanol and gasoline are splash blended as the tanker truck fills before making the final trip to the gasoline station. From this point on in the supply chain, the corrosive nature of ethanol is not a concern. The tanks and piping systems of most gasoline stations today are constructed out of fiberglass and corrosion-resistant plastics.

Why Trade RBOB Gasoline Futures?

The refiner’s role in the process is very important and sometimes is lost when traders evaluate the energy sector. First, transportation of this fuel can be expensive, as can the refining process to turn crude into gasoline. The prices of RBOB are directly correlated with crude oil, meaning that they will exhibit significant volatility that may be an attractive trait for many traders. Secondly, investments in gasoline can also be used to hedge against inflation, or simply to make a play on our global addiction to fossil fuels.

Refining Costs and Profits

This requires refiners to why is the consumer price index controversial substitute more expensive components into gasoline. Seasonal patterns also emerge as a result of formulation requirements for gasoline. Environmental regulations in the United States, for example, require gasoline sold in the summer to be less susceptible to evaporation.

What are some of the most common Gasoline trading mistakes to avoid?

This requires the removal of some heavy molecular weight and high boiling point components as well. In investing, RBOB gas is the benchmark for gasoline on the futures market. Minimum contracts are equal to 42,000 gallons (1,000 barrels) and trade for the value per gallon. That means you need to multiply the quoted price by 42,000 to know what the contract cost will be. The producers search for energy which includes crude oil and natural gas. The consumer uses the end product that is created for them by the refiner.

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. RBOB Short selling strategies is more expensive to refine—more energy and more effort are required to pull some of the additional hydrocarbons out of the fuel.

RBOB (Reformulated Blendstock for Oxygenate Blending)

• This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote.
• The statistics for RBOB gasoline are not perfect due to the fact that production and consumption is measured by crude oil rather than gasoline itself.
• The refiner’s role in the process is very important and sometimes is lost when traders evaluate the energy sector.
• Internal combustion engines, like those found in automobiles, burn fuel in controlled processes.
• The profit margins a petroleum refiner sees is referred to as the crack spread.

MTBE gives water an unpleasant taste and can render large quantities of groundwater unfit for human consumption. The concern is that MTBE gets into the water supply from leaking underground storage tanks or from gasoline spilled onto the ground. Another very actively traded crude oil is WTI (West Texas Intermediate). This is another light sweet crude oil that is used in the refining process to create gasoline. WTI is the US benchmark and since the US is the largest consumer of gasoline world-wide, WTI is an actively traded crude oil benchmark.

• If a position is not liquidated, the holder of a long contract might be responsible for taking delivery of 42,000 gallons of gasoline.
• Other words for gasoline used around the world include petrol, gasohol, benzine and naphtha.
• Turmoil in important oil-producing countries can create spikes in gasoline prices.
• Low Volatility ETFs invest in securities with low volatility characteristics.
• Crude oil varieties and the technology available for refining them can lead to different gasoline products and pricing from one refinery to the next.

In 2011, Mr. Pines started his own consulting firm through which he advises law firms and investment professionals on issues related to trading, and derivatives. Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts. Increasing demand for gasoline in Asia, Latin America and the Middle East often outpaces supply from those regions.

When using Plus500 to trade gasoline, you’re trading Contracts For Difference (CFDs) that track the price of gasoline. CFDs are derivative products that you can trade on Plus500 that give you exposure to gasoline price fluctuations. Since gasoline is refined from crude oil, understanding the major crude oil exporters sheds light on the biggest gasoline exporters as well.

Seasonal pollution requirements for gasoline can also lead to disparities in pricing as can weather-related disruptions to refinery operations. You can also trade Gasoline indirectly through CFDs on ETFs that track the price of Gasoline or that include companies within the Gasoline industry such as stocks like Royal Dutch Shell. Daily articles and insights from the fuel markets and natural gas space.

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. The role of the refiner should not be underestimated as it allows crude products to be altered into a consumable good such as gasoline, diesel fuel or jet fuel.

The supply of gasoline depends on the availability of both crude oil and refineries. Industry watchers measure refiners by their capacity, which is the amount of crude oil that can go into distillation units. These industrial facilities separate crude oil, which consists of different hydrocarbons, into smaller component hydrocarbons or fractions.