West Texas Intermediate (“WTI”) oil is currently trading below $75 per barrel, according to data from Oilprice.com, significantly down from the more than $100 per barrel mark reached in May this year. However, renewed tensions in the Middle East, following President Donald Trump's statement that the ceasefire agreement with Iran is no longer in effect, are once again supporting oil prices.
Considering the uncertainty arising from the renewed tensions, with the United States and Iran having already exchanged new, intense attacks, and its impact on the flow of oil through the Strait of Hormuz, which is responsible for the flow of significant global oil volumes, traders are taking a cautious approach. Oil prices remaining significantly below the highs seen earlier this year are aiding refiners like Phillips 66 PSX with relatively attractive feedstock costs.
In other words, PSX, a leading refining company, is now able to purchase oil at a lower cost, enabling the production of end products. Thus, Phillips 66, which generates significant margin from its refining activities, is likely to benefit from lower oil prices.
Will MPC & VLO Also Gain?
Marathon Petroleum Corp. MPC and Valero Energy Corporation VLO are two other leading refining companies that are well poised to gain from the relatively softer crude prices.
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 soft oil prices will also likely aid refining margins, as input costs are still lower.
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 that transportation, freight, agriculture and industrial activity are still holding up. As a result, with higher refinery activity and constrained fuel supply, refining margins for refiners like VLO are quite strong.
PSX’s Price Performance, Valuation & Estimates
Shares of PSX have gained 39.8% over the past year compared with the 34.1% improvement of the industry.
From a valuation standpoint, PSX trades at a trailing 12-month enterprise value to EBITDA of 13.26X. This is above the broader industry average of 5.58X.
The Zacks Consensus Estimate for PSX’s 2026 earnings has seen upward revisions over the past 30 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.
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Phillips 66 (PSX): Free Stock Analysis Report
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Marathon Petroleum Corporation (MPC): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).