Crack Spread
The refiner margin between product prices and crude, traded as a futures spread.
Overview
A barrel cracks into products, roughly half gasoline and a third distillate, and the 3 2 1 crack sells three crude against two gasoline and one heating oil, approximating a US refinery slate, while 5 3 2 shifts toward distillate. Crack futures and options let refiners lock margins and hedge inventory, and the spread is the signal of refining economics: strong cracks mean capacity is short, as after 2022 when sanctions and diesel scarcity kept margins historic, weak cracks mean glut, as in the 2020 demand collapse. Seasonal patterns follow driving and heating, hurricanes spike them locally, and the spark spread does the same math for power, gas versus electricity.
Related Topics
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