The spread between crude oil and it's products: heating oil and unleaded gasoline plays a major role in the trading process.
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Is the purchase of crude oil against the sale of the refined products. In futures trading, it is the simultaneous purchase of crude oil futures versus the sale of heating oil and gasoline futures. The spread differentials reflect the potential refining margins or profitability. The spread computes the cost of the raw commodity input, crude oil, and its refined products, gasoline and heating oil. Compare to Reverse Crack Spread.
a type of commodity product spreading involving the purchase of crude oil futures and the sale of gasoline and heating oil futures.
in petroleum, the difference in value between crude oil and the product(s) refined from it, a reflection of Refining Margin
A spread between crude and refined oil prices.
(1) In energy futures, the simultaneous purchase of crude oil futures and the sale of petroleum product futures to establish a refining margin. See Gross Processing Margin. (2) Calculation showing the theoretical market value of petroleum products that could be obtained from a barrel of crude after the oil is refined or cracked. This does not necessarily represent the refining margin because a barrel of crude yields varying amounts of petroleum products.
A hedge used in the energy futures market to offset the risk of buying (or selling) crude oil with an opposite transaction in the refined products that may be derived from it.
A set of futures market transactions that attempts to simulate the commercial position of a refiner as a buyer of crude oil and a seller of refined products. The purpose is to duplicate the profit margin that exists in refining. The most popular crack spread on Nymex is known as the "3-2-1," or the purchase of three crude oil contracts against the sale of two gasoline contracts and one heating oil contract. This relationship may be reversed in winter when heating oil is in greatest demand.
The word "spread" is generally used in the financial industry to refer to the difference between two related entities that can be expressed quantitatively while the word "crack" is used in the oil refining industry as a verb describing the process of separating and transforming the various chemical components of crude oil into saleable refined products. Thus the term "crack spread" refers to the spread, or margin, that a refinery can earn by cracking a barrel of oil into refined products.
