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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Patrick Slevin who wrote (9346)	5/9/2008 12:31:23 AM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Technical question. I used to know the answer to this. What's the change in the crack spread after the summer changeover? They add less butane to the gas, wasn't that part of it? I forget the breakdown of gas to HO et cetera, do you remember offhand? oh yea....sure I do..... not.... but i've got the book sitting here.... lets go to the book. his comment is that a barrel of crude oil yields such aromatics as benzene, unleaded gasoline, jet kerosene, diesel fuel, heating oil, bunker fuel, and asphalt. depending on the type of crudeoit, the yield will be roughly 67 percent gasoline to 33 percent heating oil or 60% gasoline and 40% heating oil. the 3-2-1- crack spread balance 3 units of crude aginst 2 units of gasoline and one of heating oil. less common is the 5-3-2 spread... since it takes time to refine the crude you should be in say July Crude and August in Gasoline and heating oil. the crude contract is for 1000 barrels price being set in dollars. The product contracts specify 42,000 gallons and prices are in cents per gallon. In fact, a barrel contains 42 gallons so the contracts are the same size. Each contain 1000 barels or 42,000 gallons which turns out to be size of one New York harbor barge load. sometime each summer refiners switch their process from maximizing gasoline production to maximizing heating oil production..Refiners can't do one or the other very barrel produces both produces so the shift is more of emphasis. product prices ordinarily reflect the shift with deferred heating oil prices rising relative to nearby to encourage the build up of stocks. How much higher they go, in relative terms, will largel be a funcion of the weather outlook for the Northeastern US the primary heating oil market. ......... John