Why did the 3:2:1 crack spread widen to $54.45 this month?

The 3:2:1 crack spread is $54.45 a barrel, up $8.91 over the past 30 days. That spread is the theoretical margin a refiner earns turning three barrels of crude into two of gasoline and one of diesel, and it just moved the refiner's way by a wide step. The question is what moved it and who is holding the extra margin now.

Start with crude, because it is the cost side of the spread. WTI is down 28.5% over 30 days and is now within six cents of its 30-day low of $68.58. Brent is $71.94, down 26.4%. Crude fell about a quarter of its value in a month and is now sitting on the floor of its own range.

The wire says why. Oil is on track for a fourth straight weekly loss as flows through the Strait of Hormuz reopen and tankers move again. The war premium unwound as the U.S.-Iran ceasefire held. TotalEnergies is offering Iraqi Basrah crude into Asia at deep discounts on the spot market. Citigroup told clients it expects Brent at $60 to $65 by year end and is recommending selling any summer rally. The cost side of the spread came down hard, and the reporting points at supply fear draining out of the price rather than demand falling away.

Now the product side, because the spread only widens if products held up better than crude. They did. ULSD diesel futures are $3.25, down 15.5%. RBOB gasoline is $2.77, down 11.5% and sitting on its 30-day low. Both fell. Neither fell anywhere near crude's 28.5%. Crude dropped roughly twice as fast as the fuels made from it, and that difference widened the spread. A refiner buying crude at today's price and selling product at today's price clears $54.45 a barrel on the 3:2:1, up $8.91 over the past 30 days.

So the driver is plain. Crude lost its geopolitical premium faster than gasoline and diesel followed it down, and the margin widened at the refinery gate. The harder question is where it lands past the gate, at the rack and the street.

Retail is where the easy story breaks. U.S. diesel at the pump is $4.668, down 12.7%. Wholesale diesel futures are down 15.5%. Wholesale fell faster than the pump, which should hand the street a wider diesel margin. The retail-wholesale diesel spread says the opposite. It is $1.336, down $0.375 over the month. Street diesel margin compressed by better than a third of a dollar even as the pump price dropped.

Those two numbers do not sit on the same clock, so I will not force them together. One is the front-month futures move of 15.5%. The other, the $1.336 spread, measures pump price against a wholesale rack that lags and gets set on contracts, not the screen. When wholesale falls fast, the pump follows slower on the way down the same way it does on the way up, and for a month that lag would widen retail margin, not shrink it. The shrinking spread tells me the wholesale cost the street actually paid did not fall as much as the front-month screen did. I am confident the refiner gained. I am less confident the diesel retailer did, and the spread says the diesel retailer gave a little back.

Gasoline is cleaner. U.S. gasoline at the pump is $3.964, down 10.7%. RBOB wholesale is down 11.5%. Wholesale fell a touch faster than the pump, so the street held its gasoline margin close to flat and maybe a hair better. Nothing dramatic on the forecourt. The pump tracked its wholesale down almost step for step.

Put it together and the answer to where the margin is landing is the refinery gate, at least for now. The $54.45 crack is a refiner number, and it widened because crude fell about twice as fast as product. A refiner running crude this month earned a good margin, and the reporting says the gain came from a supply-fear premium leaving the crude price. Product prices fell too, they just fell less. The rack and the street did not capture the same windfall. Diesel retail margin narrowed to $1.336. Gasoline retail margin held roughly flat.

What I am sure of is that the spread widened because of crude, not products, and the plain beneficiary is whoever turned crude into fuel this month. What I am not sure of is how long it holds. Citi is calling for crude at $60 to $65, and if the pump and rack keep grinding lower while crude finds a floor near $68.58, the product side would have to fall further to pull the crack back in, or crude would have to bounce. Either way the widest part of this margin looks like a refinery event tied to one month of crude repricing, and the street is not seeing the same size of it.

And that was just the data. See you tomorrow.