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« Market Higher in 2007: The Underlying Bid from Stock Buybacks | Main | Parabola Hyperbole »

May 24, 2007



Interesting. I had an entirely different--and much less appealing--interpretation of the phrase "crack spread". :)


Thanks to all for the comments. The various discrepancies in crude oil trading generate both short-term losses for those owning upstream energy companies, usually unwarranted, and also some opportunities.

The crack spread is traded on a mean-reverting basis by many in the energy futures crowd. Sometimes the refinery capacity throws this off.




The anticipation of the new Dubai oil contract plus the Kuwatis starting the de-linking to the dollar could have a bit to do with the WTI Brent spread beyond the obvious refinery issue

Wolf Stone

Hello Prof,
Another discrepancy we see in the energy markets is that brent crude trading higher and west texas crude trading lower even though WTI is much better suited to gasoline refining. Just wanted to thorw this tidbit of information in as you were discussing crack spreads and divergences in energy !!


I'm afraid I did not understand what you were saying about the latest divergence. As I understand it from your explanation, the "crack spread" should prevent this from happening, so why do you suppose this is happening? (no WSJ subscription so perhaps you could elaborate)

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