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Exclusive: Don’t Buy Crude ETFs for the Refining Crunch—Veteran Trader Warns of a ‘Temporary Crude Surplus’

Despite historic refining margins and 10% of global capacity sitting offline, former Petronas trader Baron Lamarre warns that a “temporary crude surplus” makes ETFs like United States Oil Fund, LP (NYSE: USO ) and United States Brent Oil Fund, LP (NYSE: BNO ) poor plays right now. Instead, experts suggest targeting individual refiners to safely capture the product shortage. Disconnect Between Crude and Crack Spreads The U.S. 3-2-1 crack spread recently hit a record $64 per barrel with ~8 million bpd offline, yet raw crude prices have failed to match that downstream boom. A ‘crack spread’ is the gross profit margin an oil refinery earns by breaking down—or ‘cracking’—crude oil into refined petroleum products like gasoline and diesel. Lamarre, co-founder of the International Digital Exchange (INDEX), attributes this to a fundamental divergence: "This...

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Instead, experts suggest targeting individual refiners to safely capture the product shortage.

Disconnect Between Crude and Crack Spreads The U.S.

3-2-1 crack spread recently hit a record $64 per barrel with ~8 million bpd offline, yet raw crude prices have failed to match that downstream boom.

A ‘crack spread’ is the gross profit margin an oil refinery earns by breaking down—or ‘cracking’—crude oil into refined petroleum products like gasoline and diesel.

Lamarre, co-founder of the International Digital Exchange (INDEX), attributes this to a fundamental divergence: "This looks more like a temporary crude surplus running into a genuinely separate product shortage, rather than tight refining capacity dragging crude prices up with it." Consequently, Lamarre cautions against using broad commodity funds to trade the refining crunch: "I wouldn’t lean too hard on the refining story as a support factor for something like USO or BNO specifically." Read Also: Elon Musk Says Economy Will Be Measured in Energy, Not Money, as SpaceX Eyes Orbital Solar Power The Case for Individual Refiners Navellier & Associates founder Louis Navellier agrees, explicitly advising traders to “ prefer individual stocks ” like Phillips 66 (NYSE: PSX ) and HF Sinclair Corp. (NYSE: DINO ).

Lamarre echoes this, noting record margins provide a “much cleaner tailwind” for refiners than crude trackers.

Furthermore, Lamarre and Bitunix analyst Dean Chen warn that futures-based ETFs face contango risks that can “quietly eat into returns” through “negative roll costs.” Lamarre emphasizes USO and BNO are “tactical vehicles right now, not buy-and-forget.” Lamarre’s Crude Price Scenarios Emphasizing a wide-band outlook over tight forecasts, Lamarre outlines four crude scenarios: Baseline Range: Brent $80–$100 and WTI $76–$95.

Near-Term Escalation: If Hormuz disruptions hold, Brent could test $100 and WTI mid-$90s.

Full Chokepoint Closure: A total Strait shutdown could push crude to $110–$120.

De-escalation: Normalizing flows could ease Brent to $75–$90 and WTI to $70–$85.

Navellier maintains war spikes will be “temporary,” projecting WTI to peak “up to $82 per barrel” through Labor Day.

Price Action in Crude and Related Instruments At the last check, Crude Oil WTI Futures were down 0.61% at $81.28, and Brent Oil Futures were 0.05% lower at $88.06.

Meanwhile, USO closed 3.91% higher on Friday, and it was down 0.25% in the premarket on Monday.

Similarly, BNO closed 4.10% higher at $48.70, and it was 0.11% higher in the premarket on Mnday.