European gasoline cracking price spread hit its largest weekly increase in history, with significant repair in refining profits. BP p.l.c. Sponsored ADR (BP.US) rose more than 1.5%.

After the US-Iran war pushed up oil prices and squeezed refining profits, the gasoline market experienced a sharp reversal. The latest data shows that the European gasoline premium relative to crude oil recorded the largest single-week increase in history, bringing a noticeable boost to refining companies. As of the time of writing, BP p.l.c. Sponsored ADR (BP.US) and Equinor (EQNR.US) rose by more than 1.5%, Shell (SHEL.US) rose by 0.72%, and Total (TTE.US) rose by 0.62%. In the Northwest European market, the gasoline price differential relative to crude oil (i.e. the "crack spread") rose to over $17 per barrel on Friday, a significant increase of about $25 from the previous week, marking the largest single-week increase since 2010. This strong rebound, following several weeks of rapid decline, indicates a significant increase in volatility in the energy markets. Industry analysis points out that the "roller coaster" trend of the current gasoline crack spread is mainly due to the drastic fluctuations in physical crude oil prices. In early April, Brent crude oil spot prices reached a record high, leading to a negative gasoline spread and severe pressure on refining profits. With recent declines in crude oil prices, gasoline prices have remained relatively strong, leading to a significant increase in the spread and a rapid recovery in refining profits. Consulting firm FGE NexantECA noted that the earlier rise in oil prices had caused some gasoline-focused refineries in Europe to incur losses and even face production reduction risks. However, the current gasoline crack spread has risen to double-digit levels, significantly improving the profitability of refineries. Despite the short-term recovery in refining profits, market participants remain cautious. Analysis suggests that the current profit levels need to be sustained to avoid refineries reconsidering production cuts. Energy Aspects analysts point out that European refining profits are "improving, but need to remain stable", otherwise production cut pressures in a high-cost environment could reappear.