Refiners are one of the energy sub-sectors that could benefit the most from higher oil prices. Historically March marks the end of a five-month stretch in which monthly crack spreads (value of refined products minus the prices of the crude oil feedstock) tends to increase. Spreads are generally 4 percent wider in March than February.
This year, some refiners are getting an added bonus because of the significant price difference between WTI and Brent crude oil. Currently, Brent is trading about $15 a barrel higher than WTI, which means that some refiners are buying their oil $15 below global prices. This adds to the profitability of each barrel.
The discount may remain wide for the time being because crude oil supplies from Canada and the mid-continental region of the U.S. have risen faster than demand. These supplies travel to storage facilities at the delivery hub in Cushing, Oklahoma, which makes it difficult to be exported overseas. This creates a supply glut unique to the region.
I get that higher oil prices would be good for refiners, but couldn’t lower oil prices be better since it would allow for further widening of crack spreads?
Yes