Energies Market

Petroleum and Natural Gas Futures

Introduced in the late 1970s, energy futures emerged from a need to control price volatility through risk management. Futures and options allow for efficient price discovery by allowing the markets to move naturally with supply, demand and geopolitical events. To protect prices from volatile, dramatic swings, futures and options contracts help regulate the extent prices change in a given timeframe. The result is added protection for consumers and producers alike.

Highlighted Contracts

Crude Oil – An essential commodity is used in nearly all aspects of modern life – gasoline, plastics, paint, fertilizer, medication, etc. As a consequence, crude oil and its price are always in high demand. Crude oil is not a uniform product and it is common practice to classify crudes based on three characteristics: gravity, sulfur content, and field of origin. The names of respective crude oils are indicative of these characteristics, such as West Texas Intermediate and Brent.

Natural Gas – Natural gas is primarily a domestic commodity used extensively throughout the U.S. to heat homes, power engines and has important applications in commercial and industrial settings. Once considered an ineffective byproduct of crude oil production, natural gas is becoming steadily more attractive as an energy source. Oklahoma, Louisiana, Texas, and New Mexico account for eighty percent of the natural gas production in the U.S. Economical, environmentally friendly and efficient, natural gas is the cleanest-burning fossil fuel, and technologies are improving its capture, transportation and distribution. Demand normally peaks with winter’s heating needs and summer’s air conditioning usage.

RBOB (Reformulated Gasoline Blendstock for Oxygen Blending) – From an investment standpoint, the term petrol or gasoline refers to Reformulated Gasoline Blendstock for Oxygen Blending (RBOB), which is simply the term given to unleaded gas futures. RBOB Gasoline futures are traded on the Chicago Mercantile Exchange, with prices quoted in U.S. Dollars and cents per gallon under the symbol RB. A single contract represents 42,000 gallons with a minimum fluctuation of $0.0001 per gallon. Listed contracts conduct trading throughout the next 36 consecutive months. Seasonally, gas futures tend to dip in the winter months, November and December, and reach their peaks between April and May. Because the United States is the largest consumer of gasoline, how our nation uses gasoline can have a major impact on global prices.

Reports to Watch

API Inventory
EIA Weekly Petroleum Status Report