RBOB Futures

Reformulated blendstock for oxygenate blending futures, or RBOB as it is commonly known in commodities futures trading, is a newer blend of gas which allows for 10 percent fuel ethanol. RBOB is the new benchmark form of gasoline, traded in the New York Harbor barge market that is ready for the 10 percent ethanol addition at the truck rack.

Markets

Hurricanes in the Gulf of Mexico can cause price spikes in RBOB futures, since most of the U.S refineries are located in that area. Seasonally, gas futures normally reach their lowest price levels in December and their highest prices in April - May. The refineries are usually gearing up for gasoline production in the spring. Any refinery shutdowns or problems can cause markets to move higher, since we will need large supplies of gasoline for the summer driving season.

History

The NYMEX changed the grade of gasoline that is to be traded at their exchange in 2006. In the late twentieth century it went from leaded to unleaded. The New York Mercantile Exchange (NYMEX) began a contract for unleaded gasoline (first UR, then HU) in late 1984. Beginning in October 2005, NYMEX began trading a futures contract for delivery of RBOB alongside HU futures, as unleaded futures products were phased out of the commodities futures selection.

Facts

Gasoline is the single largest refined product in the U.S. and accounts for half of the national consumption of oil. Besides the large demand for gas, there are numerous of other factors, like government laws, which can affect the price. Gasoline is a by-product of crude oil. For every three barrels of crude oil that is refined, it yields about two barrels of gasoline.

Trading

  • About 65 cents in taxes added to the price of gas futures equates the retail price paid at the pump. The retail price usually lags about a week.
  • Gas futures typically follow the price of crude oil futures.
  • The RBOB gasoline futures contract is cash settled.
  • The futures product is traded at the InterContinental Exchange.
  • Units of trading are 1,000 barrels quoted in U.S. dollars and cents per gallon. If the market is trading at $2/gallon, the contract will have a value of $84,000 ($2 x 42,000 = $84,000).
  • Daily limits equate to a move of $10,500 per contract or 25 cents/gallon.
  • RBOB gas futures are deliverable all year-round.

You can learn more about Energies futures by downloading our guide, Free Fundamentals of Trading Energies Futures.

 

Contract Specifications 

Contract SymbolContract UnitPrice Quotation
GRB42,000 gallonsdollars per gallon
Trading ExchangeTrading HoursTick Value
CME GLOBEX18:00 - 17:15$0.0001 per gallon

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