RBOB Gasoline Futures RB Contract Specifications

Listed contracts conduct trading throughout the next 36 consecutive months. 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 are broken up by heat and pressure into lighter molecules.

Physical Properties of RBOB Gasoline

It is used to formulate gasoline that complies with the Environmental Protection Agency’s (EPA) regulations on air quality, making it essential for meeting federal and state requirements. Furthermore, RBOB gasoline is widely traded on commodity exchanges, serving as a benchmark for gasoline prices and providing traders with an opportunity to speculate on future price movements. RBOB’s market behavior is closely tied to other petroleum products within the refined goods ecosystem. Products like diesel, jet fuel, and heating oil compete for refinery capacity, influencing production priorities and pricing.

Using Calendar Spreads and Options for RBOB

• As a result, weather events or supply congestion in that area can cause short-term delays or price spikes.
• When the spread is elevated there is an incentive for US refiners to purchase WTI over Brent.
• This requires refiners to substitute more expensive components into gasoline.
• This makes it more eco-friendly and less harmful to our environment.

After it is distilled from petroleum, RBOB is blended with ethanol to produce reformulated gasoline. Globally, RBOB’s relationship to other petroleum products is influenced by regional refining configurations and trade flows. U.S. refineries typically prioritize gasoline, while European facilities focus on diesel, creating opportunities for international trade.

Brent is described as light because of its relatively low density, and sweet because of its low sulfur content. Brent Crude is extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes. Brent crude oil is used to price nearly 65% of all global crude oils. RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”.

It is less expensive but can be more harmful to the environment than RBOB. Say you want to buy an RBOB contract when the price is around $2.30 per gallon. That means you only need 12% of the total investment down to buy the contract on margin.

• It is also important to note that our consumption is roughly twice that of our production, making our nation so dependent on foreign oil.
• There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking.
• The price is mainly determined by the cost of crude oil, which is set on the global market based largely on supply and demand.
• This requires the removal of some heavy molecular weight and high boiling point components as well.
• RBOB stands for Reformulated Blendstock for Oxygenate Blending, while CBOB stands for Conventional Blendstock for Oxygenate Blending.

Refining

It excludes state and federal taxes, as well as other manufacturing, distribution and marketing costs that go into determining the final fuel price that consumers see at gas stations. Before publishing our April 24 story about the president’s inaccurate claims of much lower gasoline prices, we asked the White House for supporting evidence. It is more expensive but is more environmentally friendly than regular gasoline. CBOB stands for Conventional Gasoline Blendstock for Oxygen Blending, which is a fuel blend used in areas with lower ozone levels.

Market speculation and investment flows contribute to price dynamics, as traders respond to perceived risks or opportunities. Additionally, currency exchange rates can impact RBOB pricing, particularly when fluctuations in the U.S. dollar affect international trade. The statistics for RBOB gasoline are not perfect due to the fact that production and consumption is measured by crude oil rather than gasoline itself. The figures below represent global consumption and production of crude oil, of which gasoline is derived. An important factor to understand about gasoline is its octane rating. Internal combustion engines, like those found in automobiles, burn fuel in controlled processes.

Crude Oil Prices

RBOB is typically used in regions where ethanol-blended gasoline is mandated by law, such as the United States. However, refinery maintenance or production adjustments during this time can temporarily impact RBOB availability. Weather events, such as hurricanes, may also disrupt supply chains, creating price volatility. Another very actively traded crude oil is WTI (West Texas Intermediate).

CBOB and RBOB

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. Certain options strategies, like vertical spreads, have predefined profits and losses. For example, since many of the refineries for gasoline are located in the U.S.

CARBOB is even more expensive, and is the main reason why California gasoline prices are typically higher than anywhere else in the country. 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. The elimination of lead in gasoline and the introduction of catalytic converters in the mid-80s was only the first step in cleaning up the air. Other compounds, such as sulfur and benzene, still made it past the catalytic converter and into the air. Refiners have been adding MTBE to gasoline since 1979 to raise gasoline octane ratings and help prevent engine knocking. MTBE also displaces gasoline components such as aromatics— e.g., benzene and sulfur—optimizing the oxidation during combustion.

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When it comes to crude consumption, the U.S. uses more than the next four highest consumers combined. It is also important to note that our consumption is roughly twice that of our production, making our nation so dependent on foreign oil. Ethanol serves to boost octane levels in gasoline, which can be helpful. As for individual states, AAA said the lowest average price on May 7 was roughly $2.65 per gallon in Mississippi. While they both fuel your car, there are some key differences Best setting for macd between the two. This fuel is specifically designed for cars that are equipped to use oxygenated fuel, with the addition of an oxygenated component.

There are various forms of this process, including thermal cracking (the most popular) and catalytic cracking. Other production/refining methods include polymerization, teoria de dow alkylation, and isomerization. Gasoline itself was not invented, but rather was discovered as a by-product of the production of kerosene and the refining of crude oil. It was thrust into popularity with the introduction of automobiles, which had the option of using various fuel sources, but ultimately settled upon gasoline for its strong combustion properties.

RBOB Gasoline Futures (RB) Contract Specifications

The higher the octane rating, the higher the compression rate, with a more efficient fuel capable of a higher output than those with a lower octane rating. RVP measures the volatility in gasoline and is subject to seasonal mandates. So, blending ethanol can be complicated during summer months, when people are looking for lower-RVP gasoline. Instead, ethanol is most often blended in at the rack, closer to its ultimate destination.

At this point, the gasoline that comes out of the refinery is not a finished product. In the technical language of the industry, it is avatrade review a blending component, or a blendstock. 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.

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. As a globally traded commodity, the price of RBOB gasoline can be affected by fluctuations in exchange rates, particularly the value of the U.S. dollar. Since RBOB gasoline is priced in U.S. dollars, a stronger dollar can make RBOB gasoline more expensive for buyers using other currencies, while a weaker dollar can have the opposite effect. In addition to seasonal demand, factors such as economic growth, industrial activity, and consumer sentiment can also drive demand for gasoline and, consequently, influence RBOB prices. RBOB gasoline futures are traded at the NYMEX under ticker symbol RB.