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PSX sees tight refining capacity, low fuel inventories and reduced Chinese exports supporting margins.
Shortages may outlast 2022, supporting refining profits into the September quarter and potentially 2027.
PSX shares gained 84.7% in a year, while 2026 earnings estimates were revised upward over seven days.
West Texas Intermediate (“WTI”) crude is trading at above $85 per barrel. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $80.88 per barrel for this year, up from $65.40 last year. This reflects that the input costs for refiners are on the higher side, as refiners are buying crude at a high price to produce end products like gasoline. Does it mean that the business environment of refiners like Phillips 66 (PSX - Free Report) is deteriorating? Let’s delve into it.
On its second-quarter 2026 earnings call, PSX noted that there aren’t enough refineries or products globally right now because much refining capacity is offline and fuel inventories are low. China is also exporting less fuel than usual. This shortage helps keep refining margins, also called crack spreads, high.
Management believes these shortages may take longer to resolve than in 2022, which could keep the energy major’s refining profits strong into the September quarter and potentially 2027. The broader scenario is thus likely to favor refiners like PSX, despite high input costs.
Will PARR and VLO Also Gain?
The favorable business environment is also likely to benefit refiners such as Par Pacific Holdings Inc (PARR - Free Report) and Valero Energy (VLO - Free Report) .
Par Pacific continued to benefit from a strong refining market as it entered the third quarter. Its refining index, which is a rough measure of how profitable it is to turn crude oil into products like gasoline and diesel, was still very high in July at $31.34 per barrel, slightly below the second-quarter average of about $33. Looking ahead, PARR appears well-positioned to benefit from still-strong refining margins, firm fuel demand and tight global product inventories.
Valero Energy is unlikely to be an exception. The overall favorable refining business backdrop is also expected to be aiding VLO’s bottom line.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 84.7% over the past year compared with the industry’s growth of 79.7%.
Image Source: Zacks Investment Research
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.80X. This is above the broader industry average of 5.66X.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for PSX’s 2026 earnings has been revised upward over the past seven days.
View the Zacks #1 Rank List
Image: Bigstock
WTI Surges, Yet Phillips 66's Refining Backdrop Looks Supportive
Key Takeaways
West Texas Intermediate (“WTI”) crude is trading at above $85 per barrel. The high prices are being driven by ongoing tensions in the Middle East. The U.S. Energy Information Administration (“EIA”) in its latest short-term energy outlook projected WTI at $80.88 per barrel for this year, up from $65.40 last year. This reflects that the input costs for refiners are on the higher side, as refiners are buying crude at a high price to produce end products like gasoline. Does it mean that the business environment of refiners like Phillips 66 (PSX - Free Report) is deteriorating? Let’s delve into it.
On its second-quarter 2026 earnings call, PSX noted that there aren’t enough refineries or products globally right now because much refining capacity is offline and fuel inventories are low. China is also exporting less fuel than usual. This shortage helps keep refining margins, also called crack spreads, high.
Management believes these shortages may take longer to resolve than in 2022, which could keep the energy major’s refining profits strong into the September quarter and potentially 2027. The broader scenario is thus likely to favor refiners like PSX, despite high input costs.
Will PARR and VLO Also Gain?
The favorable business environment is also likely to benefit refiners such as Par Pacific Holdings Inc (PARR - Free Report) and Valero Energy (VLO - Free Report) .
Par Pacific continued to benefit from a strong refining market as it entered the third quarter. Its refining index, which is a rough measure of how profitable it is to turn crude oil into products like gasoline and diesel, was still very high in July at $31.34 per barrel, slightly below the second-quarter average of about $33. Looking ahead, PARR appears well-positioned to benefit from still-strong refining margins, firm fuel demand and tight global product inventories.
Valero Energy is unlikely to be an exception. The overall favorable refining business backdrop is also expected to be aiding VLO’s bottom line.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 84.7% over the past year compared with the industry’s growth of 79.7%.
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA (EV/EBITDA) of 10.80X. This is above the broader industry average of 5.66X.
The Zacks Consensus Estimate for PSX’s 2026 earnings has been revised upward over the past seven days.
PSX currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.