Courtesy of Jean-Luc Saillard
How do refiner make money? Like everyone else, by selling the final product more expensively than the input product. That margin is called the crack spread and it varies with time. With a high crack spread (like today), they make more money. But eventually, it will reverse to average and that will put pressure on refiners. Below are 2 charts that compare the crack spread performance to VLO and TSO.
The correlation is quite telling! Which means that we should expect weakness with both these stocks as the crack spread reverts to its average.
