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Crack spreads draw attention as fuel tightness weighs on rates
The crack spread, a measure of margins between crude inputs and refined outputs, is being linked to tighter fuel supply and demand conditions that can pressure bond markets.
Mortgage News Daily says the term “crack spread” is becoming more mainstream, particularly over the past few weeks. The outlet describes crack spreads as a concept that reflects the margin between input and output fuel costs, commonly framed using gasoline and diesel.
The article notes petro-focused traders often reference a “3-2-1” crack spread, which compares the value of outputs to inputs using 3 barrels of oil margin versus 2 barrels of gas and 1 barrel of diesel. It says these spreads are used to gauge refined-product fundamentals, not just crude moves.
According to Mortgage News Daily, crack spreads are seen as a way to capture supply and demand imbalances in fuels, with widening spreads suggesting gas price changes are reinforced by refined-product fundamentals rather than merely reflecting crude oil shifts. The outlet also says crack spreads have correlated with bonds more than individual fuel metrics during large, long-term swings.
In the medium term, Mortgage News Daily argues fuel futures such as gas and diesel may be more relevant than crude oil, but either way, looming fuel cost implications are weighing on bonds.
Latest closeWTI crude $80.18 ▲1.1%|Gasoline (RBOB) $3.100 ▼3.9%