Why has the 3:2:1 crack spread widened to 54.81 this month?
The 3:2:1 crack spread is 54.81, up 9.73 over the past 30 days. It measures the gap between what a refiner pays for a barrel of crude and what it gets back selling two parts gasoline and one part diesel, so a wider crack means a fatter refining margin. The question is what pushed it up almost ten points in a month, and who is collecting the extra.
Crude is the first number to check. WTI is down 24.3% over 30 days, to a low of 68.25. Brent is 72.69, down 22.9%. Crude is the thing a refiner buys, and it has fallen hard in a month.
Products are the other side of the trade. U.S. gasoline is 3.964, down 10.7% over the same 30 days. U.S. diesel is 4.668, down 12.7%. Both fell, but at roughly half the pace of crude. When the cost of crude drops about twice as fast as the price of the fuels made from it, the margin between them opens up. At the level of arithmetic, the crack widened to 54.81 because crude fell faster than product.
That only moves the question back a step. Something made crude fall 24% while gasoline and diesel held most of their value, and those two things are not the same event.
The crude side shows up plainly on the wire. Gulf producers are cutting official selling prices to move barrels. Saudi Arabia cut its OSP to Asian buyers by as much as $11 per barrel, the sharpest such cut in decades, and Reuters reports other Gulf exporters are cutting deeper still to sell crude that has sat in the Gulf for more than three months. On top of the discounting, the Strait of Hormuz is reopening: four million barrels of Saudi crude on two VLCCs are heading back out through the chokepoint, and Indian state refiner MRPL has chartered a tanker to load Iraqi crude again. Barrels that were stuck are moving, and sellers are marking them down to clear them. More crude looking for a buyer means a lower crude price, which dragged WTI lower.
The product side has its own story, and it runs the other direction. Ukrainian drones have spent 40 days hitting Russian refineries, including Omsk, described as Russia's largest, with fuel queues reported across the Omsk region after the strike. When refining capacity goes offline, the barrels of crude behind it keep flowing but the diesel and gasoline they would have made do not. That tightens product supply at the same moment crude supply is loosening. Two forces pointed opposite ways both widen the crack: cheaper crude from Gulf discounting and the Hormuz reopening, and firmer product from refinery outages abroad. With both pushing the spread the same way, it moved a long way this month.
The more useful question for anyone in this business is where the 54.81 is landing. A crack spread is a refinery-gate number. It measures the margin a refiner earns turning crude into fuel, and right now that margin is wide. This looks like a good month for refiners, and it is one they earned by running plants while crude got cheaper under them and product held. There is no trick in it. They carried the crude-price risk and the move went their way.
Whether that margin travels down to the marketer and the retailer is a separate number, and it says no. The diesel retail-wholesale spread is 1.336, down 0.375 over 30 days. A marketer keeps that spread between the rack and the pump, and it narrowed while the refining margin widened. Retail diesel fell 12.7% at the same time, so the street price came down for the buyer, but the marketer's cut of it got thinner, not thicker. The extra margin this month is sitting at the refinery, not at the counter.
What I am sure of: the crack widened because crude fell about twice as fast as product, and the data supports that without any interpretation. What I am fairly confident of: the crude drop is Gulf discounting plus the Hormuz reopening, and the product firmness owes something to Russian refining capacity being knocked offline. Those are the stories on the wire that fit the numbers, though I cannot weigh exactly how much each one contributed from the figures I have.
What I cannot call is how long 54.81 holds. ULSD diesel futures are 3.2692, down 9.2% over 30 days and closer to their 30-day low of 3.0931 than their high. That says the futures market may expect product to keep catching down toward crude, which would narrow the crack from here. If Gulf sellers keep cutting to clear stuck barrels, crude could stay soft and hold the margin open a while longer. If Russian capacity comes back or product prices slide to meet crude, the spread could give back some of its nine points. For now the margin is real, it is wide, and it is landing at the refinery gate.
And that was just the data. See you tomorrow.