Larry Livingstone

Expect Oil's 'Crack Spread' to Widen

Reason why the crack is widening today, in my opinion ($2 up to $12.35 for the front month) is that front month WTI is undervalued...you can infer it from the WTI-Brent spread hitting a low of -$2.35 (versus a normal average of positive $0.7) and the contangon widening again to around $3.00...every time this has happened in the ast few months it switched back with WTI increasing (look at WTI at $35 on 1/15 as a perfect example...the crack hit $13.9 then)

Winter Heating Oil, Nat. Gas and Crude Oil Preview

Hi Tim, good article. Isn't the crack spread for gasoling also interesting here? December is currently at $3.27 which is more than a dollar below the cash operting cost to refine...why would the refiners work at a loss?
Also, do you know if there is an exchange out there that lists a spread between Natural Gas and heating oil? That ratio is around 45% lower than the hostroical norm and with 85% historic correlation, should revert to the mean over time...

Tracking Crack Spreads

Hi,

Great article. With the crack spread on gasoline for Oct trading at around $0.33...wouldn't you say this is a good time to buy the spread? P.S. you said that buying the spread entails buying crude and selling gasoline but in essence you want to sell crude and buy gas to bet that either crude price will fall or gas price will rise or both right? or am i missing something here?