Crude oil crack spread

A petroleum refiner producing gasoline and heating oil could use a futures crack spread to lock in both the cost of oil and output prices. As the refiner buys crude oil as an input, that is the long futures position in the crack spread; as the refiner sells gas and/or heating oil, that's the short position.

Category:

Education

Tags:

• Finance
• Derivatives
• Futures
• Commodities
• Hedge
• Excel

[tsabbad]

Cracking is used to produce gasOLINE, not NATURAL gas.

[comecra85]

Not natural gas but petroleum.

[crudeoilsystems]

cracking is an art

[jackson8777]

Please correct me if im wrong... but 5 gallons of crude oil cannot simply be said to make 3 gallons of gas and 2 gallons of heating oil. The refining process takes many steps that separates hydrocarbons in different amounts along the way. 5 gallons of crude oil would create some octanes, some hydrogen gas, some kerosine, some alkenes, some diesel, etc.

I think you've oversimplified the cracking method.

[industrialhemprocks]

Rick Simpson's "Hemp Oil"

[Seaxuan]

Hello Mr Harper, Could you help me to understand why in the crude oil future markets, lots of traders often trade Jun/Dec & Dec red Dec future calendar spread, are there any fundamental reasons behind this?

[ashu851]

Cool...makes it so intuitive..Thanks Mr Harper..all great videoes!