What Is RBOB Gas?

That’s why you’ll often see ethanol listed along with gasoline and diesel in rack prices. Blendstocks are blended with other liquids, such as ethanol, to make finished gasoline. Gasoline is similar in that it has multiple components that make up the gasoline recipe. At the end of that recipe you have two types of almost finished gasoline called Conventional Blendstock for Oxygenate Blending and Reformulated Blendstock for Oxygenate Blending. The chart above shows the weekly average import volume, in thousands of barrels, of RBOB (with special blending components for blending with ethanol) into the PADD 1—Northeast area. Do you notice that there are no imports prior to the middle of 2004?

Factors Affecting Natural Gas Prices

To create this quote, RBOB gasoline is converted into US dollars per barrel. This can be accomplished by multiplying RBOB gasoline by 42, which converts the cents per gallon quote into a US dollars per barrel quote. You can then subtract the price of Brent crude oil from the price of RBOB gasoline to derive the crack spread.

Crude Oil Price Forecast – Crude Oil Continues to Look Sideways

Well, let me introduce you to the two of them (and their cousin). 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. Each of these products is recovered at different temperature points.

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. If you are buying it, you expect that the crack spread will strengthen, meaning the refining margins are growing because crude oil prices are falling or demand for the refined products is growing. Of course, it is a bit of an oversimplification of the refining process as one barrel of oil doesn’t make exactly one barrel of gasoline and, again, different product mixes are dependent on the refinery.

Commodities and Trade Tariffs

Conventional Blendstock for Oxygenate Blending (CBOB) is a blendstock that’s combined etoro forex broker review with ethanol to get E10 gasoline. The blendstocks are a mix of components such as butane, reformate and FCC gasoline, which can be combined in different ways to reach needed specifications. To these blendstocks other liquids are added to make the substances that fuel our carpools, take us to grocery stores and get our families to their summer vacations. And, mostly, that final mixology does not happen at the refinery level. One of the earliest biotechnologies employed by man, the fermentation of sugar into ethanol, has been with us since prehistory.

The alcohol review: wealth management unwrapped, revised and expanded in wine, beer, and that fine single-malt scotch is the same ethanol that is blended into our gasoline. Leading up to 1990, the wintertime pollution over a number of major metropolitan areas caused concern about the levels of sulfur and different unburned hydrocarbon compounds in automobile exhaust. The cold air allowed engines to run cooler, creating more unburned hydrocarbons.

After it is distilled from petroleum, RBOB is blended with ethanol to produce reformulated gasoline. 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. When the crack spread is negative there is no incentive for refiners to purchase and refine Brent oil. This generally occurs during a recession or Brent oil is artificially buoyed by supply disruptions. When the crack spread is elevated and the price is well above the cost for refiners to convert Brent into RBOB, there is a large incentive to purchase and refine as much crude oil as possible. The producers search for energy which includes crude oil and natural gas.

• At the end of that recipe you have two types of almost finished gasoline called Conventional Blendstock for Oxygenate Blending and Reformulated Blendstock for Oxygenate Blending.
• This activity is known as the downstream process of oil and gas companies.
• Gasoline is also used as a fuel in equipment for construction, farming, forestry and landscaping.
• 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.
• To these blendstocks other liquids are added to make the substances that fuel our carpools, take us to grocery stores and get our families to their summer vacations.

The Elements of a RBOB Contract

RBOB gasoline futures are listed on the Chicago Mercantile Exchange (CME) under the futures symbol RB. Although it does not receive as much investor interest as crude oil futures, the contract serves as an essential vehicle for market participants seeking to speculate and hedge in the gasoline market. A crack spread is the difference between the wholesale price of a refined petroleum product such as gasoline and the price of crude oil.

RBOB gasoline often goes by the names gasoline, petro gasoline or petrol. RBOB is an acronym for “Reformulated Gasoline Blendstock for Oxygen Blending”. This type of gasoline is used as the benchmark for gasoline trading on the Chicago Mercantile Exchange. The term “reformulated” describes gasoline that does not have any MTBE “Methyl tert-butyl ether”. 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.

So, blending ethanol can be complicated during summer months, when people are looking for lower-RVP gasoline. Today, ethanol is used primarily as motor fuel and a fuel additive. Futures contracts aren’t as popular among individual investors as stocks and bonds because they are generally harder to analyze and trade.

The concern is that MTBE gets into the water supply from leaking underground storage tanks or from gasoline spilled onto the ground. Investors can also trade puts and calls on RBOB gasoline Etf que es futures. Certain options strategies, like vertical spreads, have predefined profits and losses. Importantly, however, RBOB gasoline futures options do not see a great deal of trading activity, and this lack of liquidity makes these contracts less than ideal for aggressive options trading strategies. 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.

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. That means you need to multiply the quoted price by 42,000 to know what the contract cost will be. RBOB (Reformulated Blendstock for Oxygenate Blending) is a specially produced reformulated gasoline blendstock intended for blending with oxygenates downstream of the refinery where it was produced.