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General TradingC
Crack Spread
The Crack Spread is the difference between the price of crude oil and the prices of its refined petroleum products, such as gasoline and heating oil. It is used as a measure of refining profitability and is actively traded in futures markets as a spread trade. A widening crack spread indicates improving refinery margins, while a narrowing spread signals declining profitability.
Example
“A refinery trader monitors the crack spread by comparing the price of crude oil at $70 per barrel against gasoline futures at $2.50 per gallon. A widening crack spread indicates higher refining margins, making it profitable to buy crude and sell refined products.”