Differentials (Diffs)

A differential refers to any contract priced against another, with appropriate volume conversions, so the value of the diff is decorrelated from the outright prices of oil. Differentials are not cracks, which are also differentials but specific to a product value against the underlying crude price. Differentials are useful for oil traders to interpret variations, such as the same product in different geographical locations, different specifications within a core product or a link from crude futures to more physically related contracts.