Trade policies and tariffs further influence market dynamics, as changes to the flow of raw materials and finished products can alter production costs and pricing. The distribution of RBOB involves refiners, distributors, and retailers. After refining, RBOB is transported via pipelines, barges, or tankers to blending terminals, where it is combined with oxygenates before reaching retail outlets. Logistics significantly affect gasoline costs and availability, with disruptions in transportation or pipeline operations often leading to price fluctuations.
Low Volatility ETFs invest in securities with low volatility characteristics. These funds tend grid trading strategies to have relatively stable share prices, and higher than average yields. Trading in a current delivery month will cease on the last business day of the month preceding the delivery month.
What Is It – Gasoline
Other exchanges, such as the Intercontinental Exchange (ICE), also facilitate trading of RBOB gasoline-related products, including options and futures contracts. 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. 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. The most important and direct factor is the price of crude oil because RBOB Gasoline is gotten from crude oil. By extension, any factors that affect crude oil prices will also affect gasoline prices.
Seasonal Demand
Industry watchers measure refiners by their capacity, which is the amount of crude oil that can go into distillation units. Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline is a fuel product made from refined crude oil. RBOB gasoline often goes by the names gasoline, petro gasoline or petrol. The price of RBOB gasoline is influenced by various factors, both at the micro and macroeconomic levels. Understanding these factors is essential for traders looking to engage in RBOB gasoline trading. Based on the TradingView chart for RBOB Gasoline futures (RB), the lowest price the RBOB Gasoline futures contract has ever fallen to was $0.3105 per gallon, which happened in July 1986.
Oxygenates are added to gasoline to help reduce carbon monoxide emissions, promote cleaner air, and comply with regulatory standards. RBOB is typically used in regions where ethanol-blended gasoline is mandated by law, such as the United States. You trade the contract through a futures broker that will grant you access to the exchange where RBOB Gasoline futures contracts are traded and also help to clear your trades.
Refining
Since ethanol may increase the NOx, other additives and formulations are needed to meet higher air quality standards in California, which has a lower NOx limit. However, most traders opt for cash settlement to avoid the complexities of physical delivery. Geopolitical events, such as conflicts in oil-producing regions or political instability in key gasoline-producing countries, can have a profound impact on the price of RBOB gasoline. Any disruption to the global supply of crude oil, which is often exacerbated by geopolitical tensions, can lead to price increases for RBOB gasoline. Traders closely monitor global events and political developments, as these can trigger significant price fluctuations. You can use the RBOB Gasoline futures strategy to speculate on gasoline price fluctuations, diversify your portfolio into the energy sector, or hedge your exposure in the market.
Environmental regulations in the United States, for example, require gasoline sold in the summer to be less susceptible to evaporation. Gasoline is also used as a fuel in equipment for construction, farming, forestry and landscaping. 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. One of them has sold 30,000 copies, a record for a financial book in Norway. The minimum price fluctuation is one-hundredth of a cent ($0.0001) per gallon.
- The second is the difference between the cost to generate gasoline and the price where gasoline can be sold is the profit margin.
- Gasoline is a mixture of those hydrocarbon chains with boiling points below that of water.
- Futures involve leverage, which can sink a whole account in days with relatively small moves.
- RBOB also has a lower Reid Vapor Pressure, which can help reduce the amount of evaporative emissions.
- Any disruption to the global supply of crude oil, which is often exacerbated by geopolitical tensions, can lead to price increases for RBOB gasoline.
If you are interested in trading RBOB gasoline, you can take a look at our best commodity brokers for some options. From the chart above, you can see that the RBOB Gasoline futures tend to perform better between February and the end of June. The market seems to decline in the second half of the year and the month of January.
The margins on calendar spreads are lower because the two contracts have a high degree of correlation and generally move in the same direction. However, one contract might move more than the other due to market conditions. RBOB gasoline futures are listed on the Chicago Mercantile Exchange (CME) under the futures symbol RB. This also means that fuel ethanol attracts water, making it corrosive to the steel used in pipelines and plumbing at oil refineries. If ethanol is pushed through a pipeline, the water that it attracts will corrode the inside of the pipes. If it’s mixed with gasoline at the refinery, every pipe and tank that it passes through will be subjected to higher levels of corrosion.
In addition to your analysis for entry and exit signals, you need to have some risk management and trade management techniques. 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 refiner, just like the producer and consumer is incentivised by profits. Fortunately, traders can evaluate refiners profits by analyzing the margins they produce. The profit margins a petroleum refiner sees is referred to as the crack spread. One of the most well-known refinings crack spreads is the RBOB/Brent crack spread.
What is the contract size?
Additionally, RBOB price changes lag a few days behind the price you pay at the gas station. So, keeping an eye on RBOB prices can give you a sense of where retail gas prices are headed. Futures contracts aren’t as popular among individual investors as stocks and bonds because they are generally harder to analyze and trade. Futures involve leverage, which can sink a whole account in days with relatively small moves. It is common because it is considered better for the environment and is required in some areas. 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.
On expiry, the seller delivers the specified quantity of RBOB Gasoline to the buyer, under the supervision of the exchange. For example, if you trade with a 20x leverage, a 1% negative movement would lead to a 20% loss, and a 5% negative movement would result in a 100% loss in your account (wipe out your account). On the other hand, if you trade with a 2x leverage, a 1% negative move would only cause a 2% loss in your account, while a 5% adverse move would only cause a 10% loss in your account.
- 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.
- 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 older engines, gasoline could combust too early or late, causing the pistons in the engine to fall out of sync and causing a loud “knock” in the engine.
However, refinery maintenance or production adjustments during this time can temporarily impact RBOB availability. Weather events, such as hurricanes, may also disrupt sober living meaning supply chains, creating price volatility. A crack spread is the difference between the wholesale price of a refined petroleum product such as gasoline and the price of crude oil. Changes in environmental regulations, such as stricter emission standards or government mandates regarding the use of ethanol in gasoline, can have a significant impact on RBOB gasoline prices. For example, during times of increased regulatory oversight or mandates to use higher ethanol blends, the demand for RBOB gasoline may increase, pushing up its price. The ability of refineries to produce RBOB gasoline is another critical factor affecting RBOB prices.
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. The Clean Air Act of 1970 introduced a tidal wave of regulation to the automotive and oil industries (and many others). This requires refiners to substitute more expensive components into gasoline. California is the largest gasoline-consuming state with over 15 billion gallons consumed every year.
RBOB is made up of a blend of reformulated gasoline and CBOB is composed of conventional gasoline. RBOB is more expensive than CBOB, but it also has lower emission levels, making it more environmentally friendly. Fluctuations in global demand and how refineries respond to changes in demand can materially affect gasoline prices. As a globally traded commodity, the price of RBOB gasoline can be affected heiken ashi oscillator indicator for mt4 with indicator download by fluctuations in exchange rates, particularly the value of the U.S. dollar.