Whereas buying an RBOB future could cost thousands, shares of ETFs can cost less than $20. Oil refineries separate out the different chains by heating the crude oil to different vaporization points, and then distilling the resulting vapors. 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. Here are four important facts for anyone trying to trade the gasoline futures market.

U.S. Energy Information Administration – EIA – Independent Statistics and Analysis

So this may give you some insight into what retail gas prices will be in a few days. 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. 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.

How Does RBOB Gas Work?

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. Experts have different opinions about gasoline prices, but there is a consensus that its price is tied to both crude prices and refinery capacity. Also, the OPEC countries have often had disagreements with one another about production levels.

What’s Happening in the Markets This Week

Turmoil in important oil-producing countries can create spikes in gasoline prices. In the past, Middle East wars, oil embargos, political coups and acts of terrorism have created fears of supply disruptions and higher prices. The costs of operating refineries and the productivity of those refineries can have a major effect on gasoline prices. The supply of gasoline depends on the availability of both crude oil and refineries.

What It Means for Individual Investors

You can then subtract the price of Brent crude oil from the price of RBOB gasoline to derive the crack spread. The producers search for energy which includes crude oil and natural gas. The consumer uses the end product that is created for them by the refiner.

Electricity generators and emergency power supplies also use gasoline. Barchart Plus Members have 10 downloads per day, while Barchart Premier Members may download up to 250 .csv files per day. The Cash Contract is listed as the first contract at the top of the https://www.1investing.in/ page. Ethanol serves to boost octane levels in gasoline, which can be helpful. 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.

1. Prices tend to fall in the winter when inclement weather keeps consumers off the roads.
2. Turmoil in important oil-producing countries can create spikes in gasoline prices.
3. Tuesday’s rally in the dollar index (DXY00) to a 2-1/2 week high was bearish for energy prices.
4. Like any other commodity, natural gas is influenced by the forces of supply and demand.
5. 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.
6. WTI is the US benchmark and since the US is the largest consumer of gasoline world-wide, WTI is an actively traded crude oil benchmark.

Sometimes, detergents or other additives are blended into gasoline before it hits retail stations—those additives are a way that fuel brands differentiate themselves with customers. Blendstocks are blended with other liquids, such as ethanol, to make finished gasoline. To reiterate, most of the gasoline produced what is a moat by refineries is actually unfinished gasoline or gasoline blendstock. Drivers may think that crude oil goes into a refinery and gasoline comes out. 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.

Start your research with reviews of these regulated brokers available in . California is the largest gasoline-consuming state with over 15 billion gallons consumed every year. In the lead-up to summer, prices tend to rise in anticipation of peak driving season. Prices tend to fall in the winter when inclement weather keeps consumers off the roads. Gasoline is also used as a fuel in equipment for construction, farming, forestry and landscaping.

The term crack spread describes the difference between the value of gasoline and crude oil. This activity is known as the downstream process of oil and gas companies. In the refining process, crude oil is heated and introduced into the distillation tower. Liquids and gases are separated into components by weight and boiling point.

The value of a CFD is the difference between the price of gasoline at the time of purchase and the current price. CFD traders, therefore, have direct economic exposure to the commodity. The Middle East used to have a stranglehold on the top ten producers worldwide, but the U.S. recently surpassed the region’s output. For the most part, this list contains both emerging and frontier markets, which is what makes gas prices so volatile.

The refiner’s role in the process is very important and sometimes is lost when traders evaluate the energy sector. In investing, RBOB gas is the benchmark for gasoline on the futures market. Minimum contracts are equal to 42,000 gallons (1,000 barrels) and trade for the value per gallon.