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Jul 26, 2013 · Crack spreads are a major indicator of refiner earnings and valuations. Read up on the basics of crack spreads in our special crack spread primer series.
3-2-1 Crack Spread. The 3:2:1 crack spread calculation starts with the spot price for two barrels of gasoline, added to the spot price for one barrel of heating oil, and then subtracts the spot price for three barrels of WTI crude oil.
- What Is A Crack Spread?
- Understanding A Crack Spread
- Using A Crack Spread to Hedge Price Risk
- Trading A Crack Spread
- Reading A Crack Spread as A Market Signal
A crack spread refers to the overall pricing difference between a barrel of crude oil and the petroleum products refined from it. It is an industry-specific type of gross processing margin. The “crack” being referred to is an industry term for breaking apart crude oil into the component products, including gases like propane, heating fuel, gasoline...
The price of a barrel of crude oil and the various prices of the products refined from it are not always in perfect synchronization. Depending on the time of year, the weather, global supplies, and many other factors, the supply and demand for particular distillates results in pricing changes that can impact the profit marginson a barrel of crude o...
The traditional crack spread strategies used to hedge against these risks involve the refiner purchasing oil futuresand offsetting the position by selling gasoline, heating oil, or other distillate futures that they will be producing from those barrels. Refiners can use this hedge to lock in a profit. Essentially, refiners want a strong positive sp...
Generally, you are either buying or selling the crack spread. If you are buying it, you expect that the crack spread will strengthen, meaning the refining margins are growing because crude oil prices are falling or demand for the refined products is growing. Selling the crack spread means you expect that the demand for refined products is weakening...
Even if you aren't looking to trade the crack spread itself, it can act as a useful market signalon potential price moves in both the oil and refined product market. If the crack spread widens significantly, meaning the price of refined products is outpacing the price of oil, many investors see that as a sign that crude oil will eventually rise in ...
Jan 24, 2023 · The WTI ‘3-2-1 crack spread’ touched a three-month high of $42 a barrel — and that could be worrisome for consumers.
5 days ago · Find information for RBOB Gasoline Crack Spread Quotes provided by CME Group. View Quotes.
The crack spread — the theoretical refining margin — is executed by selling the refined products futures (i.e., gasoline or diesel) and buying crude oil futures, thereby locking in the differential between the refined products and crude oil.
People also ask
How do you calculate a 3 2 1 crack spread?
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What is a crack spread?
How do you calculate RBOB crude oil crack spread?
Aug 7, 2019 · The weekly chart of the RBOB Brent crack spread shows that at times the crack was as high as $28 dollars per barrel and as low as -$5.5 per barrel.
