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RBOB is the best performing component in the oil basket

Published Thursday, November 5th, 2015

As the year draws to an end we will inevitably see reports concerning the re-balancing of commodity indices for 2016. Below we use this as an excuse to have a look at the performances of the five main oil futures contracts, beginning in 2007 when RBOB took over the role of NYMEX Unleaded Gasoline.

Looking at the performances of the front-month contracts over the last nine years there is little that stands out. Front-month WTI lost $15/bbl (24%) between January 1, 2007 and 30 October, 2015. Brent is down $11/bbl (19%), Heating Oil 13 cents/gallon (8%), RBOB 24 cents/gallon (15%) and Gasoil $61/tonne (12%). These returns are, however, misleading because they do not include rollovers.

When rollovers are taken into account the picture could not be more different. For the purpose of this exercise we assume that positions are rolled from one month to the next on the first trading day of each calendar month. Including rollovers the picture is even more disappointing with the notable exception of RBOB. Monthly rollovers have resulted in an additional $52/bbl loss on WTI bringing the net performance for the period to -109%. Even if you take out the combined rollover costs of $30/bbl of the steepest WTI contango of 2009 and 2010 you would still end up losing $22/bbl. Brent lost an extra $14/bbl when switching from the front-month to the second one and the net result is -42%. Rolling Heating Oil positions has cost an extra $35/bbl equivalent and the net performance is -58%, whilst Gasoil would have made you 24% poorer including rollover costs of $8/bbl equivalent.

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Posted by Tamas Varga

Tamas Varga has been in the oil industry since 1992 and with PVM for 18 years. During his time in the industry he has gathered a range of experience in the oil markets. At PVM Tamas is in charge of data collection and analysis.