The Most Profitable Business on Earth Today

-

 The Most Profitable Business on Earth Today!


If you are thinking it’s lithium mining, then you are wrong. It’s the oil refining business that is minting a crazy amount of profits today! Let us understand!

What are 3-2-1 crack spreads?

The crude oil is refined into different products like gasoline, fuel oil, diesel, etc. by the refining companies. It’s these end products that we use in our daily lives.

To evaluate the profitability of the refining business, analysts calculate 3-2-1 crack spreads. These are calculated as:

1) Buying 3 barrels of crude oil
2) Selling 2 barrels of gasoline
3) Selling 1 barrel of fuel oil

The higher the spreads, the more profitable the refining business.

What has happened to the 3-2-1 crack spreads?

Lately, the 3-2-1 crack spreads have skyrocketed to all-time high levels of $55-60 even though the crude oil has been in a tight range of $100-$120.

What are the reasons for the rising spread?

Market participants say that multiple shutdowns of refineries due to maintenance have led to this astronomical increase. 

Having said that, the structural reason is the underinvestment in the refining space that has resulted in this rise. The covid -ve oil prices resulted in many refineries getting shut; these are still not online and with the sudden surge in demand post covid, there is not enough capacity to meet the demand!

Conclusion!

The 3-2-1 crack spreads have risen to crazy levels. If we see the historical average then at $60 spreads, the crude oil price should be $250. The market is very tight, however, it is unlikely that spreads might increase from here on unless the crude oil rallies to $150!





















Wise investing
Growth with knowledge
9898559842 

Comments

Post a Comment

Popular posts from this blog

Top-Down vs. Bottom-Up: Which Approach in Stock Investing is Right for You ?

-
Image
Let's understand this friends.  What exactly is top-down approach to investing? A top-down approach is also known as an EIC (Economy, Industry, Company) approach. The process flow of top-down investing goes like this. Is the macroeconomic situation strong in terms of high growth, low inflation, low interest rates, robust economic reforms, among others? Is the industry situation conducive to help the stock outperform? What is the demand situation, scope for innovation, pricing, creating brand value etc? Is the company having intrinsic strengths in terms of profits and solvency? What are the operating margins, efficiency ratios and the valuation of the stock? When does top-down work and when does bottom-up work? Normally, we find that large institutions and investors have their own unique preferences. But broadly, one can draw some demarcation lines. Top-down approach works when the basic approach to investing is focused on large cap. In any market, the large cap stocks tend to be mo
Read more

How to Use a Trading Journal to Improve your Trading skills

-
Image
 Hello friends. let's understand. the most    needed  How to Use a Trading Journal to Improve your Trading skills Introduction A trading diary is a detailed account of what happened during the course of a trading day. It can be used to track and analyze the trader's performance and help improve it. A trader can use this diary to keep track of the trades they made, the reasons behind them, their emotions at the time, and their thoughts and feelings throughout the day. The trading diary is one of the most important tools in a trader's arsenal. It allows them to see how they are performing in real-time as well as to identify any patterns that might exist in their trading habits. Daily-Trading Strategies The first thing that you need to do before starting to trade is to set up a trading plan. The second step is to create your day trader journal template. It should include the following: Date and time - Entry and exit points for the trade, as well as profit or loss f
Read more

How is Sensex Calculated?

-
Image
Hellow friends lets understand.  how Sensex is calculated  Since my early days of involvement in the stock market, I was intrigued by the number called Sensex (A BSE Index). I always wanted to know how Sensex is calculated. What is fascinating about Sensex is that, when it is rising or falling, almost all stocks Stock market I started investing in the Stock market in the year 2008. During that time, Sensex crashed more than 50%, from 20000 to 9000 points. The cause of the crash was the Subprime mortgage crisis in the US. When the index fell, even large stocks Crashed heavily.     Sensex’s rise and fall getting replicated by other stocks was a surprise for me. I wondered, what is the correlation between Sensex and individual stocks. The answer I got while researching about “how Sensex is calculated”. Before the COVID crash of 2020, Sensex was at 41,170 points (20-Feb-2020). Today (23-Aug-21) value is around 55,508 points. We keep seeing these numbers on our Screens. What are the
Read more