Crude oil and petroleum products remain a key commodity as far as energy production is concerned. The refining industry uses crude oil to produce petroleum products such as gasoline, diesel/gasoil, jet fuel oil, kerosene, fuel oil, residual fuel oil, etc. However, refiners will have to sell petroleum products to a price which is, in terms of $ per barrel, comparatively higher than what they paid for the crude in the first place. In other words, they operate on a profit margin which needs to be calculated, monitored and protected. This margin is called the “crack spread” and its structure is such that refiners can cover their exposure against unwanted increases in crude oil prices and undesired drops in petroleum products prices. Refiners buy crude and sell products which means they are naturally long crude oil but at the same time have a natural short position in petroleum products. Consequently, the best strategy they can implement is selling a crack spread which involves going long crude while shorting diesel and/or gasoline futures. This research was published on the Medium platform a few years ago but it is still valid today. Please click here to read the rest of the research.