Brent Crude & Crack Margins Signal Physical Market Tightness

Key Moments

Q3 Brent Rally and Refining Margin Expansion

Rabobank underscores a pronounced rally in Brent crude oil prices over Q3, with the benchmark rising from $73 to $104. At the same time, the 3-2-1 crack spread – a widely followed measure of refining margins – increased from $17 to $62.

According to the commentary, this dual move means the “effective total” shifted from $90 to $166, underscoring the degree of tightening observed in energy markets.

Rabobank Commentary on the Oil Move

Rabobank describes the current configuration of prices and margins as the key development for the quarter, emphasizing that the surge in the 3-2-1 crack spread “is what matters more” for the market, in addition to the outright Brent move.

The commentary states: “Brent oil is $104 right now, well up over a Q3 it started at $73 while the 3-2-1 crack spread is $62 vs. $17, which is what matters more, so we moved from an effective total of $90 to $166.”

Link Between Oil Prices and US Treasury Yields

Rabobank also points to a note mentioning that oil prices and US Treasury yields are being observed in a particularly close alignment.

The article cites: “The FT today notes that oil prices and US Treasury yields are in tightest relationship since 1990 – you mean during the late Cold War, when it was all about geopolitics at core? What a surprise!”