Gasoline RBOB Mini Dec '24 (QUZ24)

Description

Gasoline is a complex mixture of hundreds of lighter liquid hydrocarbons and is used chiefly as a fuel for internal-combustion engines. Petroleum crude, or crude oil, is still the most economical source of gasoline with refineries turning more than half of every barrel of crude oil into gasoline. The three main steps to all refining operations are the separation process (separating crude oil into various chemical components), conversion process (breaking the chemicals down into molecules called hydrocarbons), and treatment process (transforming and combining hydrocarbon molecules and other additives). Another process, called hydro treating, removes a significant amount of sulfur from finished gasoline, as is currently required by the state of California.

Octane is a measure of a gasoline's ability to resist pinging or knocking noise from an engine. Most gasoline stations offer three octane grades of unleaded fuel-regular at 87 (R+M)/2, mid-grade at 89 (R+M)/2, and premium at 93 (R+M)/2. Additional refining steps are needed to increase the octane, which increases the retail price. This does not make the gasoline any cleaner or better but yields a different blend of hydrocarbons that burn more slowly.

In an attempt to improve air quality and reduce harmful emissions from internal combustion engines, Congress in 1990 amended the Clean Air Act to mandate the addition of ethanol to gasoline. Some 2 billion gallons of ethanol are now added to gasoline each year in the U.S. The most common blend is E10, which contains 10% ethanol and 90% gasoline. Auto manufacturers have approved that mixture for use in all U.S. vehicles. Ethanol is an alcohol-based fuel produced by fermenting and distilling crops such as corn, barley, wheat, and sugar.

RBOB gasoline futures and options trade at the CME Group. The CME's gasoline futures contract calls for the delivery of 1,000 barrels (42,000 gallons) of RBOB gasoline in the New York harbor and is priced in terms of U.S. Dollars and cents per gallon.

Prices - CME gasoline futures prices (Barchart.com symbol code RB) moved mildly higher in early 2023 but then fell back and closed the year down -15.0% at $2.1063 per gallon. The average monthly retail price of regular unleaded gasoline in 2023 fell by -10.6% yr/yr to $3.66 per gallon. The average monthly retail price of unleaded premium motor gasoline in the US in 2023 fell by -8.1% to $4.47 per gallon.

Supply - US production of finished motor gasoline in 2023 rose by +0.8% yr/yr to 9.643 million barrels per day. Gasoline stocks in December of 2023 were up by +5.2% to 18.142 million barrels.

Demand - US consumption of finished motor gasoline in 2023 rose by +1.3% yr/yr to 8.926 million barrels per day, below the 2018 record high of 9.325 million barrels per day.

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