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Refining Margins Reach Multi-Year High

Refining margins, the Nymex gasoline crack spread, traded above $16 per barrel on Thursday—the highest it's been since 2017, Bloomberg said on Thursday.

The crack spread is the difference between the price of crude oil and the price of refined products, which include gasoline, distillates, diesel, and jet fuel.

Even as the price of crude oil continues to rise—raising the input costs for refiners—refined products prices have risen more, increasing the spread and beefing up the bottom line for refiners.

Refiners had a difficult year last year when crack spreads were atypically narrow. But now, high gasoline prices and low inventories are causing things to look up for refiners, supported in part by refinery maintenance and a handful of refinery outages.

But the demand for refined products—gasoline in particular—has exceeded pre-pandemic levels in some places, including in Italy, Bloomberg said on Thursday. In the United States—the world's largest fuel consumer--gasoline and distillate consumption has now rebounded into the five-year average range, Reuters reported last week.

U.S. refined product demand is now higher than it was this time in 2019, although jet fuel demand continues to lag.

According to Bloomberg, the rising spread indicates strong oil demand as refiners process more fuel as coal and natural gas run in short supply in Europe and Asia.

President Joe Biden warned last week that high gasoline prices will persist into next year, when he blamed those high prices on OPEC's production curbing policies.

If the White House is correct, refiners may enjoy higher crack spreads until that time.

Refiners are expected to boast higher earnings for Q3 on these higher crack spreads, according to Reuters.

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By Julianne Geiger for Oilprice.com

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