1. Crude Oil Unleaded gasoline is a by-product of crude oil. Refined product prices typically
move together over time. Refined product prices respond to movements in crude oil spot prices but generally lag behind it.
2. Federal Regulations There are countless different regional and seasonal fuel blends required
by federal clean-fuel regulations. These “boutique fuels” have increased refining and distribution costs. Boutique
fuels typically have fewer fuel producers, are less fungible, and have fewer distribution supply options. Thus, when the market
tightens, suppliers’ ability to respond is limited, often resulting in higher fuel prices and increased volatility.
3. Refinery Capacity In the United States there hasn't been a new refinery
built since 1976. Currently, US refinery utilization averages around 90%. That leaves very little extra capacity to compensate
for outages. The refineries are usually gearing up for gasoline production in the spring. Any refinery shutdowns or
problems can cause markets to move higher, since large supplies of gasoline are needed for the summer driving season.
4. Driving Season According to AAA peak driving season in the United States
runs from Memorial Day to Labor Day. During this time of the year, unleaded gasoline demand is normally at its peak. However,
oil companies begin to ramp up production of unleaded gasoline before the summer driving season begins to ensure ample supplies
of unleaded gasoline to meet the expected summer driving demand. (Beware
of brokerage firms that try to sell you on far out of the money call options as a sure bet.)
5. Inventory Reports There are two major weekly inventory reports that are helpful in your research
and trading of unleaded gasoline futures and options. The American Petroleum Institute publishes their report on Tuesdays,
and the US Energy Information Administration publishes their report on Wednesdays. These reports are very closely watched.
They summarize crude oil, unleaded gasoline and other refined product inventories, as well as refinery utilizations
rates in the United States.
These are just some of the basic fundamentals to keep
in mind when you are considering a trade in the unleaded gasoline market. Therefore, before opening up a commodity account
to trade unleaded gasoline you should consult with a licensed commodity broker that follows the unleaded gasoline market to
discuss investment strategies.
