Suncor Energy Inc. T.SU

321 Crack Spread plummets 50% in 30 days

[MigraineCall]

Gasoline and diesel have stayed flat, and missed the ride up that crude has taken in this last crude spike.

To me, the gap is a warning flag that either crude is overbought, or product prices have yet to catch up. There are many reasons why this happened on either side.

On Aug 25, 23, the 321 crack spread was at $US 47.01. A month later, it is now at $US 23.06.

1 Year 321 Crack Spread vs Oil Price:



It is the same scenario with oil stocks, as crude has outpaced the price rise of the oil producers.

However, it is arguable that crack spreads are merely returning to levels seen before on a historical basis, averaging just under $US 20.00

10 Year 321 Crack Spread vs Oil Price:



Of course, this large drop in the 321 crack spread impacts the profits of those with refineries, like Suncor.

[Clemxb7]

Crack spreads are definitely a concern. Obviously end demand is a big input into prices. Suncor cracks oil so it definitely is worth considering. It has bearish overtones. One the other hand the markets are getting further into fairly signifigant backwardation. This is the Saudi effect. Despite lower cracks the physical market is tight and getting tighter. This is a strong indication of demand

[lifeisgood1010]

Good morning Migraine, don't want to split hair with you but i keep track of daily spreads. On Aug. 25th the 3-2-1 was $39.97US or $54.32 CDN And as you point out it has fallen quite a bit As of this writting, the 3-2-1 is $24.34US or $32.85 CDN. This $32.85 is still much higher than the average of the last 17 years of the mid to high teens. What some may not get is that while the spreads

[autofocus111]

From Q2 earnings presentation p.14 FY23 price assumptions and senstivities, I'd say we're good for Q3. SU doesn't have 321 crack in their dataset, only 221 >>> Business Environment Brent $85/bbl WTI-C 80 WCS-H 61 NYH 221 Crack 32 AECO-C 2.50 FX 0.76 AFFO Sensitivities Brent +1$ 180M NYH 221 Crack 140 FX +0.01 -200 L/H Diff +1$ -30 NYH 221 Crack spread futures prices and

[autofocus111]

Correction to AFFO entry should read "NYH 221 +$1 140M". So if 221 crack drops $10 but Brent goes up $10 then we get a net increase in AFFO of 400M.

[MigraineCall]

That is the link for the ULSD crack spread, not 221. Diesel was strong, gasoline not so much. ULSD went from 57 to 49, if I'm reading it right. Agree, SU should still be strong for 23Q3, and stronger yet for 23Q4.

[autofocus111]

Oops. I made another error the SU info should all read 211 not 221 sorry. Yeah you're right it's basically ULSD (ultra low sulfur diesel) delta over Light Sweet Crude, so I guess that makes these futures technically a 202 crack spread. With lower gas price I'd expect the 211 spread is lower. Anyway, the point is that SU references 211 instead of the usual 321, presumably becuase their

[lifeisgood1010]

Auto,you are totally right.SU uses 2-1-1 By using my 3-2-1, i may be off a bit and your AFFO of $400m could also close to reality. By using my 3-2-1, i get an addition of $777 millions of added $ going to SU. How much of that will flow to EPS.Your guess is as good as mine.But what we know for sure is that Q3 will be much better than Q2. I said it before, Yahoo estimate will be much higher than

[autofocus111]

Yeah, as far as SU downstream profits, need to focus more on what diesel prices are doing. Heading into winter should see some added resilience there. But with oil prices moving up, we will need to see fuel prices move up too in order to support good crack spreads. It will be interesting to see if that turns out to be the case. Refiners going into fall maintenance may help here. Fuel prices are

[MigraineCall]

Yes, no worries. Glad you do these calculations projecting these numbers into SU earnings. Crack spreads are very subjective. There are many variables and iterations of the crack spread, also very dependent on the contract months used in the calculations, when the contracts roll, etc. To get an easy understandable chart to display for my post, I used this link:  https://en.macromicro.me

[MigraineCall]

*Suncor seems to like to use the 211.