Homework: Gasoline-to-Oil Pricing

[zyzzyva57]

Term to add to your vocab: "Crack Price" -- the price spread of separating and transforming the various chemical components of crude oil into saleable refined products--i.e., refining

http://www.investors.com/editorial/IBDArticles.asp?artsec=30&issue=20070319&rss=1

What traders do:
http://www.ameinfo.com/110772.html

An Overview of Crack Spread Futures & Options
http://www.nymex.com/crack_spread_overvi.aspx

Note: it does not help the consumers with so many regions, areas, and cities demanding specialized "cracks" and based on the season





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[TonyM]

The crack spread could come in some today. The April CL contract won't have much volume today and the May contract is $3 higher. If that $3 contango settles that way at 2:30pm it would look quite bullish for crude prices. Usually when the front month is about to expire the the prices between the new contract and the old work themselves toward each other.

[zyzzyva57]

"Fast Money" makes a big deal on the gasoline crack spread

[spanky]

Strange... I never heard the term until this morning on CNBC, then there's a thread here about it. Z is on top of the new buzz phrases.

They can really sell futures on about anything, can't they?

[TonyM]

Strange... I never heard the term until this morning on CNBC, then there's a thread here about it. Z is on top of the new buzz phrases.

They can really sell futures on about anything, can't they?

CNBC sucks, Bloomberg has a reporter in the Nymex pit with routine reports throughout the day. You have to take what she says with a grain of salt though, becuase she is telling you what the floor traders are telling her, which is often by design not true. They do throw up the charts and do some technical analysis though, and the background noise from the pit is a good indicator of how big of a rally might be taking place.

I think today will be very interesting for the future direction of oil, I've been listening to the naysayers for a week or so, all the while with my eye on the May CL contract, the media always forgets about this until the day of expiration. There is currently a $5.65 difference between the April and May crack spread, with May being lower, which coincides with $3 higher for the May CL contract. Unless there is a huge bear rally into the close, we have $60 oil for tonight, heading into the inventory numbers tomorrow.

If the market holds up, the oil patch could see a nice lift from this. If not, oil could go higher and leave the stocks behind. If we maintain $60 on the May contract through April, I think we are setting up for a nice run into hurricane season. If however crude gets beaten back down to the mid-50's this week, then the crack spread will go higher and crude may even retest $53. Fun stuff, I think we go higher but we'll see.

[TonyM]

Well the April contract expired at $56.41 at which time the now current May contract was $59.41 so we'll have to see how that holds up in overnight electronic trading. I noticed that the volume in the June contract was twice as heavy as the April contract today. I'd expect the airlines to be busy hedging their prices going into the summer.

I have not seen any change in the crack spread so far today, it looks like the April contract expired at $25.65 which leaves the new May contract at $20.06 Unless crude slides back to $56 the refiners may stall out a bit, even though $20.06 is really good profit for them.

[zyzzyva57]

Eric Bolling of "Fast Money" is fixated on the Gasoline-Crack Spread, because he is the commodities man on the show

He also gets rhapsodic about hot rolled steel

He is positively frightening when I see that gleam in his eyes, because I know at every opportunity his ilk will screw the heck out of the consumer--beyond any Law of Supply and Demand




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[TonyM]

That's because he's making bank on this crack spread, he's got to be salivating over it, these levels are above what is expected at this time of year by far.

[zyzzyva57]

He outdoes Stephen King cheesey monsters

Just think: hurricane season has not even arrived, and it is about time for those pesky Nigerian rebels to awake for the traders

Of course, we Americans don't help with all our assorted cracks or blends, but hey, never mind: we got "American Idol" and Anna Nicole to worry about, so who cares--I just say to this crowd, "DON'T BITCH WHEN GASOLINE HITS $3.50!!"

Why-oh-why want we go nuke?!




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[TonyM]

He outdoes Stephen King cheesey monsters

Just think: hurricane season has not even arrived, and it is about time for those pesky Nigerian rebels to awake for the traders

Of course, we Americans don't help with all our assorted cracks or blends, but hey, never mind: we got "American Idol" and Anna Nicole to worry about, so who cares--I just say to this crowd, "DON'T BITCH WHEN GASOLINE HITS $3.50!!"

Why-oh-why want we go nuke?!




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Bingo; hurricanes...season officialy starts June 1 but no real activity is usually expected until August when the water is good and hot. Watch the contango on the June through September cl contracts for some possible speculator sentiment on the how the season will pan out. Last year was a major anomaly, I live smack in the danger zone, so don't think I'm wishing for any, just trying to game the inevitable.

I only bitch about gas prices if I can't profit from it. $4 a gallon is cool with me, our Honda's coupled with our limited driving = not too much pain at the pump. Sorry but I can't feel sorry for others that keep buying land yachts. Look for GM & F to take a hit in the Q3 numbers if gas repeats anything close to last summer.