4 Factors You Didn’t Know About RBOB

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 Best gold etfs 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.

Crude oil varieties and the technology available for refining them can lead to different gasoline products and pricing from one refinery to the next. 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.

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. 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.

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, https://www.topforexnews.org/investing/how-to-invest-money-in-5-simple-steps/ 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. There are two components to the profit margin that a refiner can achieve.

  1. Crude oil varieties and the technology available for refining them can lead to different gasoline products and pricing from one refinery to the next.
  2. 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.
  3. From a chemical standpoint, this low-density fuel is very volatile due to its natural makeup and the numerous additives that can be mixed in, some of which include lead, ethanol, and dye.
  4. If the price of gas drops below $2.30, you would sell the futures at a loss but save money at the pump.

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.

Where Can I Trade Energy Commodities?

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. 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.

Factors Affecting Natural Gas Prices

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, 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.

How do you trade RBOB gasoline?

That means you only need 12% of the total investment down to buy the contract on margin. Lawrence Pines is a Princeton University graduate with more than 25 years of experience as an equity and foreign exchange options trader for multinational banks and proprietary trading groups. 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.

What Is the Difference Between CBOB and RBOB Gasoline?

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. Gasoline derives from refining crude oil, so the price of crude oil has a big impact on its price. Consumers use gasoline for fuel in cars, light trucks and motorcycles as well as recreational vehicles, boats and small aircraft. These industrial facilities separate crude oil, which consists of different hydrocarbons, into smaller component hydrocarbons or fractions.

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 https://www.day-trading.info/smooth-moving-average-stock-selection-strategies/ 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.

The costs of operating refineries and the productivity of those refineries can have a major effect on gasoline prices. Since both producers of WTI and Brent compete for the same refiners as customers, the spread between the two oils is an important metrics for refiners. WTI is quoted on the Chicago Mercantile Exchange for pickup in Cushing Oklahoma. This area is landlocked and therefore requires shipment via pipeline or rail. Brent crude oil is one of several types of light sweet crude oil that serves as the global benchmark for crude oil.

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