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. Since the spring of 2013, the underlying commodity for the distillate futures contract has been ultra-low sulfur diesel (ULSD), a distillate with sulfur content of less than 15 parts per million (ppm). 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.
Gasoline is a vital part of our everyday lives, and there is a strict need to consume no matter what economic conditions may be, making it an attractive investment during all kinds of markets. As mentioned above, gasoline is a natural by-product of Network Engineer vs Network Administrator crude oil. For every three barrels of crude oil refined, approximately two barrels of gasoline can be salvaged.
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 lightest components, such as gasoline rise to the top while the heaviest components, such as residual oil, fall to the bottom.
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Crack spreads vary by product and can rise or fall depending on the time of year and on market conditions. 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. Since then, numerous developments have improved the quality of gasoline as it is refined from crude oil all over the world.
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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. First, transportation of this fuel can be expensive, as can the refining process to turn crude into gasoline. The prices of RBOB are directly correlated with crude oil, meaning that they will exhibit significant volatility that may be an attractive trait for many traders. Secondly, investments in gasoline can also be used to hedge against inflation, or simply to make a play on our global addiction to fossil fuels.
Crude oil prices also saw support from Friday’s rally in the S&P 500 to a 1-week high, which showed confidence in the economic outlook and supports energy demand and crude prices. Friday’s rally in the dollar index (DXY00) to a 2-year high limited gains in crude. Drivers may think that crude oil goes into a refinery and gasoline comes out. CARBOB is admiral markets group information even more expensive, and is the main reason why California gasoline prices are typically higher than anywhere else in the country.
- Friday’s rally in the dollar index (DXY00) to a 2-year high limited gains in crude.
- If the price of gas rises past $2.30, you can sell your futures at a profit.
- Start your research with reviews of these regulated brokers available in .
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This material is from CME Group and is being posted with its permission. The views expressed in this material are solely those of the author and/or CME Group and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity.
In the past, Middle East wars, oil embargos, political coups and acts of terrorism have created fears of supply disruptions and higher prices. The margins on calendar spreads are lower because the two contracts have a high degree of correlation and generally move in the same direction. However, one contract might move more than the other due to market conditions. The goal behind the strategy is to profit from changes in the value in one contract relative to the other, although losses are possible when markets across the specific delivery months do not move as anticipated. 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 page will always show prices from the latest session of the market. The RBOB / Brent crack spread describes day trading strategies the difference between the price of RBOB gasoline and the price of Brent crude oil. RBOB Gasoline is quoted in US cents per gallon and Brent crude oil is quoted in US dollars per barrel.
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. The most prolific uses of RBOB gasoline is as fuel for various products such as cars, lawn mowers, generators, pressure washers, and many other common household appliances. But it also has other applications such as removing paint or grease, and is even used in numerous pesticides and weed killers see also Invest Like Jim Rogers With These Three Agriculture Stocks.