What is RBOB Gasoline? A CommodityHQ com Guide

So, whether you intend to trade it or not, the crack spread is worth keeping an eye on as a market signal. 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 term crack spread describes the difference between the value of gasoline and crude oil.

Physical Properties of RBOB Gasoline

If the price of gas drops below $2.30, you would sell the futures at a loss but save money at the pump. 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. From an investing perspective, RBOB gas is important because it’s the benchmark for gasoline futures. Additionally, RBOB gas prices move before the price at the pump moves.

• Prices tend to fall in the winter when inclement weather keeps consumers off the roads.
• Longer chains make heavier hydrocarbons, as well as higher boiling points.
• Now let’s look at the import volume for the CBOB for the rest of PADD 1 that does not require the reformulation.
• The RBOB gasoline futures contract is settled by physical delivery.
• In the Gulf Coast spot market, Conventional Blendstock for Oxygenate Blending (CBOB) tends to be the most liquid product because there are fewer areas requiring RFG in that region.
• For the most part, this list contains both emerging and frontier markets, which is what makes gas prices so volatile.

In the past, Middle East wars, oil embargos, political coups and acts of terrorism have created fears of supply disruptions and higher prices. Gasoline derives from refining crude oil, so the price of crude oil has a big impact on its price. forexee Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline is a fuel product made from refined crude oil.

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 agea forex broker review it also raises Reid Vapor Pressure (RVP), which can be tricky. In the Gulf Coast spot market, Conventional Blendstock for Oxygenate Blending (CBOB) tends to be the most liquid product because there are fewer areas requiring RFG in that region. So, OPIS spot market editors see a lot more Reformulated Blendstock for Oxygenate Blending (RBOB) trading in the New York Harbor region. 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. You can use the CME Group website or the Nasdaq website to find the current price of a gallon of RBOB gas. New technologies such as electric-powered vehicles, for example, could substantially reduce demand for gasoline.

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.

How Does RBOB Gas Work?

A crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it. The price of a barrel of crude oil and the various prices of the products refined from it are not always in perfect synchronization. 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.

Using a Crack Spread to Hedge Price Risk

Lawrence has served as an expert witness in a number of high profile trials in US Federal and international courts. Seasonal pollution requirements for gasoline can also lead to disparities in pricing as can weather-related disruptions to refinery operations. 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. Do you find it challenging to stay on top of daily changes in fuel prices? Are you tired of manually researching and monitoring fuel prices in multiple markets to stay ahead of the competition?

What is the RBOB/ Brent Crack Spread and How is it Used in Energy Trading?

Gasoline is a mixture of Best pairs to trade forex 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. 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.

However, one contract might move more than the other due to market conditions. Crude oil varieties and the technology available for refining them can lead to different gasoline products and pricing from one refinery to the next. 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. 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.

The boiling process produces gasoline as well as other products including kerosene and diesel fuel. The OPIS Spot Ticker provides real-time, accurate fuel price information for gasoline, diesel, jet fuel, and other refined products in all U.S. markets for a more profitable fuel transactions. Methanol, derived from natural gas, and isobutylene from the butane obtained in the crude oil refining process, are reacted together to form MTBE. Refiners can add it directly into the blending stream as gasoline leaves the refinery. But MTBE, while not classified as a human carcinogen, is suspected to be a potential human carcinogen at high doses. MTBE gives water an unpleasant taste and can render large quantities of groundwater unfit for human consumption.

The Ingredients of Gasoline

So, keeping an eye on RBOB prices can give you a sense of where retail gas prices are headed. 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. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.