Crack spread

<ul>
<li>Energy portal</li></ul>
<p>Crack spread is a term used on the <a href="/facts/Oil_industry/xCKs0yQJ">oil industry</a> and <a href="/facts/Futures_contract/4SD3dKty">futures trading</a> for the differential between the price of <a href="/facts/Crude_oil/IQV0bHVd">crude oil</a> and <a href="/facts/Petroleum_product/dngHXNJX">petroleum products</a> extracted from it. The spread approximates the <a href="/facts/Profit_margin/jlXaP9t0">profit margin</a> that an <a href="/facts/Oil_refinery/yeaW0UMv">oil refinery</a> can expect to make by "<a href="/facts/Cracking_(chemistry)/EBLtwW4g">cracking</a>" the long-chain hydrocarbons of crude oil into useful shorter-chain petroleum products.
</p><p>In the futures markets, the "crack spread" is a specific <a href="/facts/Spread_trade/4v9BR5AR">spread trade</a> involving simultaneously buying and selling contracts in <a href="/facts/Crude_oil/IQV0bHVd">crude oil</a> and one or more derivative products, typically <a href="/facts/Gasoline/lcnxq5BS">gasoline</a> and <a href="/facts/Heating_oil/gMSISJzS">heating oil</a>. <a href="/facts/Oil_refineries/yeaW0UMv">Oil refineries</a> may trade a crack spread to <a href="/facts/Hedge_(finance)/PKVBgUHb">hedge</a> the <a href="/facts/Price_risk/anS5bmz9">price risk</a> of their operations, while <a href="/facts/Speculator/BntB5nqU">speculators</a> attempt to profit from changes in the oil/gasoline price differential.
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Crack spread open-in-new

Crack spread