Crude & Refined

Crude oil is the deepest commodity market in the world, and its flat price is the reference every other energy risk hangs off. But the risk that defines the sector is the crack spread — the gap between the crude a refiner buys and the products it sells. A barrel can be fully hedged on crude and still lose money if that margin compresses, which is why crude and refined products are modelled as distinct, related exposures rather than one price.

How the market works

Physical crude is priced off a handful of benchmarks. Brent — four light, sweet North Sea streams (Brent, Forties, Ekofisk, Oseberg) — is the global reference, used to price crude across Europe, Africa and much of Asia. WTI, a light sweet grade delivered at Cushing, Oklahoma, anchors US pricing, while Dubai/Oman prices sour barrels flowing to Asia. Around those benchmarks sits one of the largest financial markets anywhere: ICE Brent and CME/NYMEX WTI futures and options let producers, refiners and traders hedge price risk.

Refiners buy crude and sell products (gasoline, diesel, jet fuel). Their margin — the crack spread, often modelled as a 3:2:1 ratio — is the core of refining risk: it widens or collapses as crude and product prices move apart. On the supply side, OPEC+ actively manages output through production quotas, making its meetings a primary price driver.

Major trade flows

The biggest exporters are the Middle East (Saudi Arabia, the UAE, Iraq) alongside a fast-growing Americas complex — the US, Brazil, Canada, Guyana and Argentina were at or near record output through 2025. Demand is anchored in Asia, where China and India are the marginal buyers, pulling growing long-haul flows from the Americas to markets east of Suez. Geopolitics continually re-routes barrels: US and UK sanctions on Rosneft and Lukoil cut Russia’s exports to roughly 6.9 mb/d in late 2025, while sanctioned Iranian crude flows almost entirely to independent Chinese refiners.