Phillips 66 Poised for Margin Gains as Diesel Crack Spread Nears $64/Barrel
Diesel futures jumped 53% in seven days to roughly $4.00 per gallon, driving diesel crack spreads to about $64 per barrel and boosting refining margin prospects for Phillips 66. Year-to-date, an equally weighted portfolio of the top three U.S. refiners has outpaced the S&P 500 ETF by over 30 percentage points.
1. Diesel Market Shock
Front-month ultra-low sulfur diesel futures surged roughly 53% in just seven days to about $4.00 per gallon, marking the fastest two-week gain on record. Geopolitical risks, including disruptions near the Strait of Hormuz, have tightened global distillate supply and pushed U.S. diesel prices about $1 above wholesale gasoline.
2. Surge in Crack Spreads Boosts Refining Margins
With crude oil near $102 per barrel and diesel futures at $4.00 per gallon, the implied diesel value stands around $174 per barrel, yielding a crack spread near $64 per barrel. That level approaches the October 2022 record and translates into sharply higher refining margins for major processors.
3. Phillips 66 Relative Performance
Phillips 66 sits among the trio of refiners best positioned to benefit from widening crack spreads. Year-to-date, an equally weighted basket of Valero, Marathon and Phillips 66 has outperformed the SPDR S&P 500 ETF Trust by over 30 percentage points, underscoring strong relative strength in refining shares.