Crack spreads reflect the level of potential profitability generated by refiners for refining a barrel into its various refined products such as gasoline and heating oil. Refiners always prefer positive (and the higher, the better) crack spreads. Crack spreads are often negative, particularly when crude oil prices are very low near the $30- or $35-per-barrel mark as they were in the first quarter of 2009. Crack spreads were negative as economies went into recession and demand for crude products faltered. As global recovery improved, both refining margins and crack spreads rebounded.
3-2-1 Crack Spread
The 3-2-1 crack spread considers the theoretical profitability of refining three barrels of crude into one barrel of heating oil ...