The Number Actually Moving This Market Isn't The One On Every Front Page
Valero is up more than 80 percent this year.
Marathon Petroleum is running right alongside it.
Phillips 66 has put on better than 54 percent.
HF Sinclair is running with the same pack.
These aren't the speculative names.
These are refiners, outfits that buy crude and cook it down into gasoline and diesel...
...the kind of business men used to call a toll booth, steady, plain, built to bore a man to sleep.
That description quit working a while back.
The number driving all of it is the crack spread...
...the cut between what a refiner pays for the crude coming in...
...and what it earns selling the gas and the diesel going out.
On August 10 the ultra low sulfur diesel crack hit an all time high, $93.84 a barrel.
The wider 3-2-1 crack, the shorthand the trading floor uses for that same margin...
...sits near $59 a barrel now and has near tripled since January.
I keep circling back to how little of this week's talk is actually about that number.
Oil climbed back over $91 a barrel this morning...
...the Iran ceasefire came apart in the night...
...and every outlet from CNBC to Bloomberg is singing the same tune...
...inflation risk, heat on the Fed, futures down about half a percent.
Fair enough.
True as far as it runs.
But crude climbing is only 1 half of a margin.
The other half is what refiners charge on the way out...
...and that half has stretched itself to a place redrawing stock charts most traders have never once opened.
Valero closed above $342 last week.
A company plenty of men could name and almost none could quote you a share price for.
I traded through 2022, when crack spreads first blew out and every refiner on the board doubled inside a year...
...then handed most of it right back once the margin shut.
CNBC ran a piece this week making the same comparison...
...calling this run close to unprecedented, saying history says stretches like it don't hold.
I don't fight the history.
What gets me is how different the market treats a number everyone can see, the price of oil...
...against a spread number almost no trader outside the energy desk checks on a given morning.
That's the part that won't let me go.
The easy story, oil and Iran, is everywhere this morning...
...same as it was an hour back and same as it'll be an hour from now.
The story that's actually put money in somebody's pocket this year...
...sits inside a metric most traders have never once typed into a search bar.
Tuesday morning threw one more log on that same fire...
...the Empire State Manufacturing Survey came in at 20.6, near double what the economists called for...
...and it barely dented the day's coverage next to the oil and the bond talk.
I don't know when the crack spread rolls over.
I don't know if Valero holds $340 or hands it back next month.
What I know is the loudest number on the tape...
...and the number actually moving the money haven't been the same number for a long stretch now...
...and this week just adds 1 more line to that list.