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Why Phillips 66 is Well-Positioned in a Softer Oil-Price Environment
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Key Takeaways
PSX is likely to gain as sub-$70 WTI crude lowers input costs for producing refined products.
Phillips 66's midstream and chemicals units help insulate it from commodity price volatility.
PSX shares are up 38.6% over the past year, topping the industry's 33.9% gain.
West Texas Intermediate (“WTI”) oil is currently trading below $70 per barrel, according to data from Oilprice.com, significantly lower than the more than $100 per barrel reached in May this year. Phillips 66 (PSX - Free Report) is likely to gain from the softer crude pricing environment. This is because PSX, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that the midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility.
Hence, having a diversified business model, the large-cap stock is insulated from commodity price volatility to a great extent. Given the strength and resilience of its business model, Phillips 66 has significant room to continue its upward trajectory.
Will MPC & VLO Also Gain?
Marathon Petroleum Corp. (MPC - Free Report) and Valero Energy Corporation (VLO - Free Report) are two other leading refining companies that are well poised to gain from falling crude prices and the tight refining capacities across the globe.
MPC runs refining systems that are the largest in the United States. With high utilization of refineries, Marathon Petroleum is well-positioned to capture almost all of the available profitable opportunities.
For refiners like Valero Energy, the considerable decline in oil prices will also likely increase refining margins, as input costs have fallen remarkably.
Apart from this, investors should note that the global refining capacity is constrained and fuel inventories are low. On the demand side, gasoline, diesel and jet fuel remain resilient. This means people are still driving and flying quite often, while diesel demand suggests transportation, freight, agriculture and industrial activity are still holding up. As a result, with higher refinery activities and constrained fuel supply, refining margins for refiners like VLO are quite strong.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 38.6% over the past year compared with the 33.9% improvement of the industry.
Image Source: Zacks Investment Research
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA of 12.64X. This is above the broader industry average of 5.42X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PSX’s 2026 earnings has seen upward revisions over the past seven days.
View the Zacks #1 Rank List
Image: Bigstock
Why Phillips 66 is Well-Positioned in a Softer Oil-Price Environment
Key Takeaways
West Texas Intermediate (“WTI”) oil is currently trading below $70 per barrel, according to data from Oilprice.com, significantly lower than the more than $100 per barrel reached in May this year. Phillips 66 (PSX - Free Report) is likely to gain from the softer crude pricing environment. This is because PSX, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products.
Although a leading refiner, PSX, unlike most of its refining peers, has diversified its business across midstream and chemicals. It is to be noted that the midstream business, by its very definition, is resilient since it generates stable cash flows as the assets are being utilized for the long term, and is less vulnerable to commodity price volatility.
Hence, having a diversified business model, the large-cap stock is insulated from commodity price volatility to a great extent. Given the strength and resilience of its business model, Phillips 66 has significant room to continue its upward trajectory.
Will MPC & VLO Also Gain?
Marathon Petroleum Corp. (MPC - Free Report) and Valero Energy Corporation (VLO - Free Report) are two other leading refining companies that are well poised to gain from falling crude prices and the tight refining capacities across the globe.
MPC runs refining systems that are the largest in the United States. With high utilization of refineries, Marathon Petroleum is well-positioned to capture almost all of the available profitable opportunities.
For refiners like Valero Energy, the considerable decline in oil prices will also likely increase refining margins, as input costs have fallen remarkably.
Apart from this, investors should note that the global refining capacity is constrained and fuel inventories are low. On the demand side, gasoline, diesel and jet fuel remain resilient. This means people are still driving and flying quite often, while diesel demand suggests transportation, freight, agriculture and industrial activity are still holding up. As a result, with higher refinery activities and constrained fuel supply, refining margins for refiners like VLO are quite strong.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 38.6% over the past year compared with the 33.9% improvement of the industry.
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA of 12.64X. This is above the broader industry average of 5.42X.
The Zacks Consensus Estimate for PSX’s 2026 earnings has seen upward revisions over the past seven days.
PSX currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.