Anyone see the crack spreads?

S

scriabinop23

Look at crude against gasoline and heating oil. On November contracts, Heating oil (HO) is 12.05. RBOB gasoline is at an unbelievable 4.03 !!!! (it was at 37.00 earlier this year).

Has the RBOB gasoline crack ever gone negative? And for how long? These refiners must be running at a near loss short term on the gasoline portion of their margin.

Whats the trade here ??? Buy the cracks???


Crude price here smells of such manipulation here....

http://futuresource.quote.com/chart... * 42 - 'CL'&a=D&z=610x300&d=medium&b=bar&st=


And the weekly:

http://futuresource.quote.com/chart... * 42 - 'CL'&a=W&z=610x300&d=medium&b=bar&st=
 
Perhaps the normal seasonal weakness in gasoline has helped it get so overdone here? (Not to mention the unwinding from the overdone from 37! From one extreme to another)

But then again, look at the HO spread.... shouldn't it be moving the other way by now?

There must be some catch up in all the products from here. I would agree with your thoughts to buy the cracks, but what is the market telling us here? (some insight from any learned energy pros?)

btw, Would be nice to see more discussions on the product cracks around here, rather than the usual "crude going 100!!!!!" threads...
 
Here's a hairbrained conspiracy theory for you. I -believe- that domestic gasoline markets are MUCH thinner and easier to manipulate than the broad oil markets (WTI, brent, dubai, etc all correlate and likely have some arb action going on).

Possibility: the FOMC/PPT has been shorting gasoline in an effort to get the #1 pressure on the consumer (and a leading inflationary pressure) under control the past few months, so they have more wiggle room. If gasoline was $4.00+/gallon (as it should be right now), imagine how those inflation #s would've looked. Imagine the dollar after a 50bp cut in the face of those #s. We'd be at 1.50/euro already.

I've seen RBOB manipulated with very very few contracts (very small cost) ... kind of amazing. I don't think the same thing is possible on CL.
 
I don't have any special answers. Never really followed the spreads, and don't follow heating oil at all. But my thought was that the RBOB was under pressure due to seasonal factors. Though clearly it would be easy to manipulate as you say.

That said, I follow some of the refiners. WNR (Western Refining) has been a great short

Interesting because it clearly gives little incentive for refiners to hold crude, meaning that these weekly supply numbers have had a tendency to show draw downs. But the draw downs don't necessarily have a bullish meaning when taken in this context.

I think crude oil is only up because of the dollar. If it were trading on fundamentals it would be significantly lower. Just an opinion.

OldTrader
 
Quote from OldTrader:


Interesting because it clearly gives little incentive for refiners to hold crude, meaning that these weekly supply numbers have had a tendency to show draw downs. But the draw downs don't necessarily have a bullish meaning when taken in this context.
More...

interesting concerning gasoline, by the way. with these spreads, it gives the refiners incentive to slow production.

I wonder how much refiners are losing per barrel to produce gasoline (remember overhead to run and maintain a refinery, pay employees, run business probably exceeds $3/barrel).
 
Quote from scriabinop23:

Look at crude against gasoline and heating oil. On November contracts, Heating oil (HO) is 12.05. RBOB gasoline is at an unbelievable 4.03 !!!! (it was at 37.00 earlier this year).

Has the RBOB gasoline crack ever gone negative? And for how long? These refiners must be running at a near loss short term on the gasoline portion of their margin.

Whats the trade here ??? Buy the cracks???


Crude price here smells of such manipulation here....

http://futuresource.quote.com/chart... * 42 - 'CL'&a=D&z=610x300&d=medium&b=bar&st=


And the weekly:

http://futuresource.quote.com/chart... * 42 - 'CL'&a=W&z=610x300&d=medium&b=bar&st=
More...


I was wondering when someone would notice this, wonder what the big oil profits will be like this quarter.

They took it on the chin to keep inflation in check it would seem.
 
Quote from scriabinop23:

Here's a hairbrained conspiracy theory for you. I -believe- that domestic gasoline markets are MUCH thinner and easier to manipulate than the broad oil markets (WTI, brent, dubai, etc all correlate and likely have some arb action going on).

Possibility: the FOMC/PPT has been shorting gasoline in an effort to get the #1 pressure on the consumer (and a leading inflationary pressure) under control the past few months, so they have more wiggle room. If gasoline was $4.00+/gallon (as it should be right now), imagine how those inflation #s would've looked. Imagine the dollar after a 50bp cut in the face of those #s. We'd be at 1.50/euro already.

I've seen RBOB manipulated with very very few contracts (very small cost) ... kind of amazing. I don't think the same thing is possible on CL.
More...

Bingo! you are spot on.
 
You gotta love the reflexive ET conspiracy mongering. Especially when you can see, on the monthly chart, that we are at the seasonal low and the cracks are as low today as they were in previous years. Still, I'd say buying the cracks, especially the rb/cl, is a good trade: I always prefer to bet on things at rock-bottom getting higher than the reverse. Cracks can get truly outrageous on the high side, but refiners aren't going to operate at a loss for long without doing something about it...
 
I'm out of my 2 crack spreads at a 1.82 loss per spread. Been in this trade for about a month ... and not getting anywhere with it. Yesterday was a good day, and I didn't want to give back my gains (err recovery of losses). exited this morning before it really collapsed.

Wow... so much pressure on the refiners. My gut says buying these spreads won't work when the Mar08 or Apr08 RBOB spreads are already in the 9-10 region. I think the rollover is going to do half of the job of the ascent.

I can imagine the spread moving from 9-10 -> 20 in spring 08, probably not now.

Anyone taking a stab at the -CL/+HO spread? I'm out, but will keep my eye on it.

My new energy trade is acquirring USO puts for November and January. We may not be at top right now, but its a seasonal stab and I don't have to fear any gap, mainly because these options limit my risk. All the funds are pimping their positions ... I know one thing: If I were to buy this crude right here, I would probably have about 2 dollars of upside and 20 dollars of downside. Likely I'd buy the top .50 of the market for the season.
[with my luck]

Remember guys: fundamentals only get you so far. Fund flows trump everything. Wheat points this lesson out. Super bullish fundamentals, but the funds are done !!! (for now) So much for trend following.

In fact, if you put wheat and oil fundamentals side by side, wheat probably trumps oil. But wheat doesn't capture your local hedge fund managers imagination, does it? No 'peak wheat' theories to get excited about.

[disclaimer: I actually do believe that peak oil has likely occurred. thats another topic altogether]
 
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