I-investor

Pure Refiners in Play

OK Brad, you're right, no index is used. When trading crack spread options, a single options position results in two offsetting futures positions when the option is exercised. So the resulting crack spread is derived as the product of two separate speculative bets. It has little to do with what is really happening in the marketplace where physical gasoline and distillates are refined.

Whatever falls out of some traders in Chicago is not primary information.That's why I am the only one who commented on your article, and I got two positives, to your one. If you want to know how the refinery business is going, you got to talk to the people in the refinery business.

Pure Refiners in Play

The NYMEX refining margins are created by subtracting the oil futures index from the refined gasoline index. As such it is highly imperfect indicator and does not capture the prices achieved by market participants. Last quarter, SUN blew away all of the analysts estimates. The NYMEX refining margins actually went negative, when in fact the refiners were making good profits. SUN said it was because they were able to buy oil more cheaply than the analysts thought. Now the speculators at NYMEX are adjusting thier positions.