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Sharp recovery in Crack Spreads
Last week was not good for refiner's profits, but crack spreads made a sharp recovery yesterday... and just in the nick of time.

We stayed above the August low by about 10%. Dipping below would have been a major caution signal.

Interestingly, as diesel has trended down in September, gasoline has started trending back up. As prices fluctuate, this has helped stabilize crack spreads as I wrote about last week.

You can see the wild fluctuation's in product cracks starting around March '22

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But you'll notice since August, 5-3-2 cracks have been fairly stable despite the divergence of gasoline and diesel. (The top 2 lines are Cushing & Midland 5-3-2 cracks, the lower 2 lines are net of RINs)

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We are not at historical crack spreads anymore, but we are still on the very high end of averages, which will bode well for earnings season.

All refiners will post solid numbers, the question will be how those numbers compare to expectations, and what guides we get for the 4th Q and beyond.

I'm working on a model that tracks daily crack spreads and refinery rates to help predict 3Q earnings. So far I've projected a few surprises, but I'm waiting for the end of the quarter to make any conclusions on 3Q results.

In the longer term, my opinion hasn't changed, the macro all points to a good (and possible great) few quarters for refiners. I'm adding incrementally on major pullbacks like we had last week.

Happy to answer questions or discuss ideas here.

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