Getting Acclimated with Crack

In the energy complex, a "crack spread" involves the price difference between crude oil and its refined products, such as jet fuel, gasoline, and diesel.

Generally speaking, higher crack spreads directly benefit the refinery firms as their profit margins surge and they are capturing more revenue per barrel processed. Of course, they tend to hedge their various risks and exposures and that can affect their bottom line, too. But, overall, in the current environment we have crack spreads surging to meet demand amid the Strait of Hormuz supply disruptions for the likes of jet fuel and diesel, especially. 

Thus, it should come as no surprise to see most refinery stocks acting well. True, we have to navigate earnings season as always. But names like PSX and CVI, the latter below on the daily chart, are sporting sound overall technicals. 

Further, if it were not for the flash of the AI bubble, with the likes of MU SNDK surging 10% per day, I strongly suspect more speculators would be aggressively long the refinery stocks in light of the what is happening in energy markets. Indeed, the best may be yet to come for refiners, which behooves us to track all stocks in that segment.

My best guess is that by the time we get into the heart of June you will see far more market players getting acclimated with crack spreads in lieu of the "crack" high from AI.