RBOB gasoline often goes by the names gasoline, petro gasoline or petrol. 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. Here are four important facts for anyone trying to trade the gasoline futures market.
The Clean Air Act of 1970 introduced a tidal wave of regulation to the automotive and oil industries (and many others). You can use the CME Group website or the Nasdaq website to find the current price of a gallon of RBOB gas. Seasonal patterns also emerge as a result of formulation requirements for gasoline.
WTI is quoted on the Chicago Mercantile become a project manager learning path linkedin learning formerly lynda com Exchange for pickup in Cushing Oklahoma. This area is landlocked and therefore requires shipment via pipeline or rail. RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”.
Like the disparity in gasoline prices, the disparity in distillate prices primarily reflects differences in quality, primary uses, seasonal consumption, and local market factors. Benchmark trades all session long with a full-day view of East of the Rockies spot fuel markets. 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. Ethanol affects nitrogen oxides (NOx) and toxic emissions as well as Volatile Organic Compounds (VOCs). For RFG (Reformulated Gasoline) to meet VOC requirements, the finished blend must have a low Reed Vapor Pressure (RVP), generally less than 7.0 psi during the summer.
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Gasoline is one of the most widely known and used commodities in the world, primarily utilized for fuels. But its application extends beyond that industry to such uses as paint solvents, among others. Ethanol serves to boost octane levels in gasoline, which can be helpful. But it also raises Reid Vapor Pressure (RVP), which can be tricky.
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- From an investing perspective, RBOB gas is important because it’s the benchmark for gasoline futures.
- The list of symbols included on the page is updated every 10 minutes throughout the trading day.
- To these blendstocks other liquids are added to make the substances that fuel our carpools, take us to grocery stores and get our families to their summer vacations.
- Of course, it is a bit of an oversimplification of the refining process as one barrel of oil doesn’t make exactly one barrel of gasoline and, again, different product mixes are dependent on the refinery.
Renewable & Alternative Fuels
Individuals who own a business that is sensitive to gas prices—a trucking company, for example—can use RBOB gas futures as a hedge. If you expect a future increase in gas prices, you can buy an RBOB futures contract, say, at $2.30 a gallon. If the price of gas rises past $2.30, you can sell your futures at a profit. If the price of gas drops below $2.30, you would sell the futures at a loss but save money at the pump. RBOB gasoline futures are listed on the Chicago Mercantile Exchange (CME) under the futures symbol RB.
Although it does not receive as much investor interest as crude oil futures, the contract serves as an essential vehicle for market participants seeking to speculate and hedge in the gasoline market. Essentially, refiners want a strong positive spread between the price of a barrel of oil and the price of its refined products; meaning a barrel of oil is significantly cheaper than the refined products. Another very actively traded crude oil is WTI (West Texas Intermediate).
RBOB Gasoline Supply and Demand
At the end of that recipe you have two types of almost finished gasoline called Conventional Blendstock for Oxygenate Blending and Reformulated Blendstock for Oxygenate Blending. 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? Today, ethanol is used primarily as motor fuel and a fuel additive. Say you want to buy an RBOB contract when the price is around $2.30 per gallon.
Role of Refineries
The alcohol in wine, beer, and that fine single-malt scotch is the same ethanol that is blended into our gasoline. RBOB gas is a grade of gasoline commonly used in the United States. It is common because it is considered better for the environment and is required in some areas. New how to buy discover financial services stock technologies such as electric-powered vehicles, for example, could substantially reduce demand for gasoline.
Importantly, however, RBOB gasoline futures options do not see a great deal of trading activity, and this lack of liquidity makes these contracts less than ideal for aggressive options trading strategies. 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. The initial margin to hold one futures contract is $4,460, with a maintenance margin of $4,060, but these margin amounts are subject to modification by the CME based on the volatility of the contract. Prices for RBOB gasoline futures logically have a high degree of correlation with crude oil since gasoline is global markets weekly update distilled from crude.
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