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Crack Spread Plummets as Refineries Suffer Through Petroleum Supply Glut

U.S. refineries are in the midst of a petroleum supply glut that’s driving down profit margins for refining crude –the crack spread-and depressing prices by over 25% since last week.

U.S. supplies of oil and all petroleum-based fuels were at the highest levels in at least 20 years, jumping to 1.81 billion barrels for the week that ended May 14, knocking profit margins at refineries off a 15 month high.

The crack spread–the profit margin that an oil refinery can expect to make by “cracking” three barrels of oil into two barrels of gasoline and one barrel of heating oil-traded as low as $11.33 a barrel Friday on the New York Mercantile Exchange (NYMEX). It touched $16.909 on May 13, the highest price since Feb. 12, 2009. The margin has dropped 62% from a record $30.479 reached on May 17, 2007.
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