4 Factors You Didn’t Know About RBOB

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.

1. Such disruptions or instability would likely be bullish for gasoline prices.
2. Aside from its health hazards, gasoline has also long been under the gun for contributing to greenhouse gases and global climate change.
3. This means that storage tanks, delivery trucks, and refining plants present the most dangerous threats of the chemical being released into the environment.
4. There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking.

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. Gasoline is a vital part of our everyday lives, and there is a strict need to consume no matter what economic conditions may be, making it an attractive investment during all kinds of markets. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs.

Gasoline CFDs

However, options also have a strike price, which is the price above which the option finishes in the money. Traders venturing into the futures market for the first time need to consider the inherent risks… Trading in a current delivery month will cease on the last business day of the month preceding the delivery month.

Gasoline is also used as a fuel in equipment for construction, farming, forestry and landscaping. Electricity generators and emergency power supplies also use gasoline. Oil refiners look at crack spreads when making production decisions. Also unique to Barchart, Flipcharts allow you to scroll through all the symbols on the table in a chart view.

RBOB Gasoline Trading Driven By Strong Demand & Rising Prices In 2024

Weak economic conditions could cause gasoline and many other commodity prices to suffer. Shares of oil companies can also react to other factors including the performance of management and the stock market in general. The most prolific uses of RBOB gasoline is as fuel for various products such as cars, lawn mowers, generators, pressure washers, and many other common household appliances. RBOB gas contracts are traded on the Chicago Mercantile Exchange.

What Is RBOB Gasoline?

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. Demand for distillates such as gasoline is driving higher global demand for crude oil. As emerging market economies grow, people will purchase more cars and other forms of transportation.

However, after the invention of the automobile in 1892, gasoline became the main source of fuel for cars and light-duty vehicles. This makes gasoline one of the most important and well-known commodities in the world. 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. Barchart Plus Members have 10 downloads per day, while Barchart Premier Members may download up to 250 .csv files per day. This tool will download a .csv file for the walrus audio aetos 120v clean power supply View being displayed.

You should consider whether you can afford to take the high risk of losing your money. The RBOB gasoline futures contract is settled by physical delivery. This means most investors want to liquidate positions prior to the expiration of the contracts. 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.

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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? Burning gasoline creates pollution and may contribute to global warming. As these concerns intensify, strong competition from greener energy sources might emerge. Much of the U.S. gasoline supply comes from refineries in the Gulf Coast region. As a result, weather events or supply congestion in that area can cause short-term delays or price spikes.

At expiration, traders must either accept physical delivery of gasoline or roll their positions forward to the next trading month. The contract trades globally on the CME Globex electronic trading platform. RBOB is a distillation of hydrocarbons from crude oil that is used to produce gasoline fuel. After it is distilled from petroleum, RBOB is blended with ethanol to produce reformulated gasoline. Methanol, derived from natural gas, and isobutylene from the butane obtained in the crude oil refining process, are reacted together to form MTBE.

While viewing Flipcharts, you can apply a custom chart template, further customizing the way you can analyze the symbols. The Cash Contract is listed as the first contract at the top of the page. Still, if you consider both together, about 200,000 barrels of BOB are imported every day into the PADD 1 area. Now let’s look at the import volume for the CBOB for the rest of PADD 1 that does not require the reformulation. Before I forget, there is the blending-stock cousin, CARBOB, a stock trading 101 with robinhood update special RBOB formula mandated by the state of California.

The minimum price tick for RBOB is 0.0001, equivalent to a movement of $4.20 for one contract. 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. RBOB gasoline futures are listed on the Chicago Mercantile Exchange (CME) under the futures symbol RB. In investing, RBOB gas is the benchmark for gasoline on the futures market.

The page will always show prices from the latest session of the market. The refiner must remove light molecular weight, high RVP components, which changes the RFG’s distillation characteristics. This requires the removal of some heavy molecular weight and high boiling point components as well. Trading in gasoline is a way to express a bullish view on crude oil. If the global economy grows at a strong rate, then eventually there may be an insufficient supply of fossil fuels available to meet demand.

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. Whereas buying an RBOB future could cost thousands, shares of ETFs can cost less than $20. 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. 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.

The Clean Air Act of 1970 introduced a tidal wave of regulation to the automotive and oil industries (and stock market rebound orbear trap many others). Well, let me introduce you to the two of them (and their cousin). Trading in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.