A calculation of the worth of a barrel of crude oil in terms of the value of its refined products, such as gasoline and heating oil. Crack spreads may be based on a variety of refinery models and also depend on the type of crude input. They are usually expressed in dollars and cents per barrel of crude.
To calculate the spread, the cents-per-gallon product prices are multiplied by 42 (the number of gallons per barrel) and subtracted from the crude oil price. For example, when heating oil futures cost $0.60 per gallon and Nymex division light, sweet crude oil is priced at $22 a barrel, the heating oil crack spread in dollars per barrel = $0.60 x 42 = $25.20 – $22 = $3.20.
The Energy Risk Glossary, now in its eighth edition, provides an at-a-glance explanation of the myriad specialised terms and acronyms used in energy trading and risk management.
This year, the guide has been updated by Aviv Handler of ETR Advisory. Energy Risk would like to thank him for his input into this edition, which benefits greatly from his valuable experience and insight into energy markets.
The fast-changing nature of these markets means much has changed since our last edition – almost 200 new entries and revisions have been made this year. Reflecting the increasing importance of regulation, definitions of the Markets in Financial Instruments Directive (MiFid) and the Ljubljana-based Agency for the Cooperation of Energy Regulators (Acer) make it into the glossary for the first time. A focus on improving back-office infrastructure and mitigating counterparty risk is also apparent from the inclusion of terms such as ‘portfolio reconciliation’ and ‘portfolio compression’.
The glossary is extensively cross-referenced, making for easy and thorough searches. We hope you find it useful.
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