 | Calculating the Crack Spreadby ShortBus on September 14th, 2008 at 3:59 pm |
(5 votes, average: 4.2 out of 5)
Loading ...This is my attempt at trying to understand calculating the Crack Spread
Based on the latest live Sunday evening prices from NYMEX and this formula:
(((RB*2*.42)+(HO*1*.42))-(CL*3)))/3
Light Sweet Crude Oil futures contract - (CL) $98.82
http://www.nymex.com/lsco_emi_cso.aspx
NYMEX Heating oil futurescontract (HO) $285
http://www.nymex.com/QH_cso.aspx
NYMEX RBOB Gasoline contract (RB) $265
http://www.nymex.com/QU_cso.aspx
Therefore the Crack Spread is $15.26
According to the following chart, the crack spread has come down a little since Friday.
http://www.bloomberg.com/apps/cbuilder?ticker1=CRK321M1%3AIND
Please correct me if I have made a mistake somewhere. I am not an energy trader.
Note: oil and gasoline is dropping in the front months well below $100, but still well over $100 in the back months. Looks like $100 is going to prove to be no resistance for Oil and is heading down still. My guess is that the consumer will not be able to handle gas at the pump over $5 for long (eck !!) and demand will drop to meet supply.
I have positions in VLO and ALJ, and I will be keeping very tight stops on them, as I believe they will come down as fast as they are going up and they will not stay up for long.
I got the same result this weekend when I was trying to code it into blocks. I think there are other calcs besides 3-2-1 like 5-2-2 or something similar. I would like clarification on this issue as well.
September 14th, 2008 at 7:24 pmNew Crack Spread based on current numbers.
RB (gasoline) - $258.95
HO (heating oil) - $280.62
CL (oil) - $96.74
Updated To reflect the current numbers.
September 15th, 2008 at 6:06 amCrack Spread = $15.05
Danny:
3-2-1 is what NYMEX and Bloomberg use for their charts. However I have seen that the contracts used for gasoline have changed from, and they use a totally different numbers to use RBOB (which I am using).
Also, it depends on which gasoline numbers you use from different regions. Reuters reported $70 Crack Spread, but that was not based on the internationally traded Nymex futures. They used some local gasoline figures from each region in the US.
September 15th, 2008 at 6:12 amCrack Spread update: $15.26
Looks like my calculations are correct, as all stocks such as VLO, TSO, WNR, ALJ, etc … are all probably going to open at least 10% lower, just as the crack spread is at least 10% lower from over $18.
September 15th, 2008 at 9:09 am