Technical Trends Point to 2024 Rally for Crude, RBOB OPIS Analysis

Drivers use more gas in the summer, which also affects the price because of the increase in demand. Not all the technical planets are aligned for a huge rally, however. Trader sentiment, as measured by the Bullish Consensus published by Market Vane is not at levels typically consistent with bottoming action. Somewhere over 60% of traders identify as bullish and more bearish sentiment is more typical for oil price valleys. At first glance, this week’s price action for West Texas Intermediate, Brent and RBOB look similar to the previous trading days of 2024. WTI briefly reached a new yearly high-water mark of $75.83/bbl but true to the form of the new year, a fade ensued and the Cushing contract settled at $75.09/bbl.

RBOB gas is a grade of gasoline commonly used in the United States. It is common because it is considered better for the environment and is required in some areas. Technical analyst Walter Zimmerman of ICAP believes that the markets for Brent and WTI may be forming a “textbook head-and-shoulders” bottom. Since mid-December, he has trumpeted the $72.29/bbl number as a prime candidate for the seasonal cycle low, with Elliott Wave analysis pointing toward a bottom for that contract as well.

  1. The second is the difference between the cost to generate gasoline and the price where gasoline can be sold is the profit margin.
  2. Certain options strategies, like vertical spreads, have predefined profits and losses.
  3. However, options also have a strike price, which is the price above which the option finishes in the money.
  4. There are two components to the profit margin that a refiner can achieve.

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But MTBE, while not classified as a human carcinogen, is suspected to be a potential human carcinogen at high doses. MTBE gives water an unpleasant taste and can render large quantities of groundwater unfit for human consumption. The concern is that MTBE gets into the water supply from leaking underground storage tanks or from gasoline spilled onto the ground. RBOB is a distillation of hydrocarbons from crude oil that is used to produce gasoline fuel. After it is distilled from petroleum, RBOB is blended with ethanol to produce reformulated gasoline.

Industry watchers measure refiners by their capacity, which is the amount of crude oil that can go into distillation units. These industrial facilities separate crude oil, which consists of different hydrocarbons, into smaller component hydrocarbons or fractions. Reformulated Blendstock for Oxygenate Blending (RBOB) gasoline is a fuel product made from refined crude oil. RBOB gasoline often goes by the names gasoline, petro gasoline or petrol. Due to gasoline’s widespread use, it has come under fire for numerous health and environmental concerns over the last few decades. From a health standpoint, the fuel stores numerous carcinogenic chemicals, and can be a danger to the general public if a leak were ever to occur.

In addition to your analysis for entry and exit signals, you need to have some risk management and trade management techniques. The contract trades globally on the CME Globex electronic trading platform. A crack spread is the difference between the wholesale price of a refined petroleum product such as gasoline and the price of crude oil.

Global Demand Picture

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. The role of the refiner should not be underestimated as it allows crude products to be altered into a consumable good such as gasoline, diesel fuel or jet fuel.

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This does not necessarily mean that the fuel will burn any better for a car engine, but just at a slower rate, which helps decrease that knocking. Ethanol needs to be mixed into gasoline at the local terminal racks, just before it’s delivered. The ethanol and gasoline are splash blended as the tanker truck fills before making the final trip to the gasoline station. From this point on in the supply chain, the corrosive nature of ethanol is not a concern. The tanks and piping systems of most gasoline stations today are constructed out of fiberglass and corrosion-resistant plastics.

If the global economy grows at a strong rate, then eventually there may be an insufficient supply of fossil fuels available to meet demand. A popular way to trade in gasoline is through the use of Contracts for Difference (CFDs) derivative instrument. CFDs allow traders to speculate on RBOB gasoline prices without purchasing ETFs, futures, options or shares of oil companies.

For example, if you trade with a 20x leverage, a 1% negative movement would lead to a 20% loss, and a 5% negative movement would result in a 100% loss in your account (wipe out your account). On the other hand, if you trade with a 2x leverage, a 1% negative move would only cause a 2% loss in your account, while a 5% adverse move would only cause a 10% loss in your account. Note that since the price changes from time to time, what is quoted here may not be the price it would be trading when you are reading this post. To get the real-time price on the CME platform or directly from TradingView, click either of those links.

What Drives the Price of Gasoline?

RBOB got as high as $2.2457/gal but closed at a more modest level of $2.2095/gal. Get a step-by-step guide on starting to trade RBOB Gasoline futures, including registration with a futures broker, funding an account, and understanding margin requirements. RBOB Gasoline futures have expiry dates and may involve the delivery of RBOB Gasoline, while RBOB Gasoline CFDs can be traded indefinitely without the issue of contract expiry or asset delivery.

SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. The map above illustrates a color-coded patchwork of different blends of reformulated gasoline, each one a specific cocktail for the climate. This map predates the complete phase-out of MTBE, but it still accurately depicts the wide variety of reformulation required at the local level. This also means that fuel ethanol attracts water, making it corrosive to the steel used in pipelines and  plumbing at oil refineries.

Since then, numerous developments have improved the quality of gasoline as it is refined from crude oil all over the world. Gasoline can be a particularly nasty thorn in a consumer’s side; prices at the pump can wildly fluctuate due to the dramatic price swings of crude over small periods of time. When trading RBOB https://traderoom.info/ futures, as with any other futures contract, the biggest risk comes from adverse price movement. Futures are leveraged instruments, so the losses are calculated using the actual value of the contract size traded, rather than the margin deposited. Trading in gasoline is a way to express a bullish view on crude oil.

Technical Trends Point to 2024 Rally for Crude, RBOB — OPIS Analysis

From an investing perspective, RBOB gas is important because it’s the benchmark for gasoline futures. Additionally, RBOB gas prices move before the price at the pump moves. So this may give you some insight into what retail gas prices will be in a few days.