How do crack spreads impact refining MLPs?
The Gulf Coast 3-2-1 crack spread was $10.3 per barrel on July 11, 2016. The average spread in 2Q16 was $11.3 per barrel. This was higher compared to an average of $8.9 per barrel in 1Q16 and $9.3 per barrel in 4Q15.
The average spread was $15.0 per barrel in 2015. The fall in the crack spread shows recovery in crude oil prices without proportionate rises in the prices of refined products, especially gasoline, in 2016.
This hurts the profitability of refining MLPs such as Alon USA Partners (ALDW), Calumet Specialty Products Partners (CLMT), and CVR Refining (CVRR) because their input costs rise more than their revenues.