Why has the 3:2:1 crack spread widened to 61.9 this month?
The 3:2:1 crack spread is 61.9, up 14.28 over the past 30 days. That number is the rough margin a refiner earns turning three barrels of crude into two of gasoline and one of diesel, and it moved a long way in a month. The question is what pushed it and where the wider margin is landing.
Crude came down hard. WTI is around $71, off 20.7% over 30 days, after a 30-day low near $68. Brent is around $76, off 18.4%, with a high near $118. A crack spread has crude on one side and finished product on the other, so a drop that size in the feedstock lifts the spread on its own as long as products hold.
Products did not hold, but they fell less. Wholesale gasoline is near $3.91, down 8.6% over 30 days. Diesel is down 12.1% over 30 days. Both came down, and both came down by less than crude did. When the input falls by about a fifth and the output falls by roughly a tenth, the gap between them opens up, and that gap is the crack. So the obvious read holds: crude led the move down and products lagged behind it, and the lag is the margin.
Why did products lag while crude sank? The wire points at refining capacity outside the United States. Ukraine's defense intelligence reported a strike on the Ilsky refinery in Russia's Krasnodar region, and satellite imagery this week showed damage at the Omsk and Saratov refineries. An offline refinery pulls its share of product off the market while crude keeps flowing, so product prices hold up while crude falls. That fits what the benchmarks show: the barrels being taken out are on the product side, not the crude side, which is the shape of a widening crack.
I could not find the driver of crude's own fall in the data I have. The move is clear and the cause is not. One wire headline calls it crude cooling and counts warning signs on the supply side, but that is a description of the drop, not a reason for it. I am not going to assign crude a cause the numbers do not give me. What I can say is that crude fell, refined product fell less, and the space between them is what widened.
Cheaper energy at the plant helps the margin a little on the cost side. Henry Hub gas is 2.94, down 7.7% over 30 days, and gas storage is 2983.0, up 11.1%. Refiners burn gas for process heat and hydrogen, so a softer gas price trims operating cost while the crack is already opening. That is a small tailwind on top of the main move, not the main move itself.
The retail side tells a different story from the refinery gate. The diesel spread between retail and wholesale is 1.28, down 0.33 over 30 days. That figure is the cut the truck stop and the retailer hold on a gallon of diesel, and it narrowed over the same month the refiner's crack widened. So the extra margin this month is landing at the refinery, not at the pump. The retailer is working a thinner spread than a month ago even as the refining margin grew. Both are running real risk to keep fuel moving, and this month the refiner had the better of it. That is a normal thing for a benchmark to do. The refinery gate and the pump do not move on the same day, and right now the refiner is on the good side of the timing.
Two cautions on the 61.9. It is a benchmark spread built from published prices, not a number any single refiner booked. A plant's realized margin depends on the crude it actually ran, the yields it actually got, and what it paid to run. And the outages driving product tightness are war damage abroad, which can reverse when plants come back or worsen if more are hit. Refining and Markets was one of the most-covered sectors on our wire over the past two weeks, at 1120 items, behind Prices at 1981, so the attention is already there. A margin propped up by someone else's plant being down is a margin that can move fast in either direction, and I would not call which way.
Where I land is narrow and I think it holds. The crack widened to 61.9 mainly because crude fell faster than gasoline and diesel did, and product prices stayed firmer than crude in part because refinery outages abroad pulled supply off the product side. The wider margin is sitting at the refinery gate this month, not at retail, where the diesel spread actually shrank. What I am sure of is the direction and roughly the mechanics. What I am not sure of is what pulled crude down in the first place, and how long the outages keep product supply tight enough to hold the spread here.
And that was just the data. See you tomorrow.