Zacks analyst report picks Phillips 66 and Par Pacific as refiners to gain from crude below $70. Lower feedstock costs widen crack spreads but demand risk remains. Alpha Score 56.
Alpha Score of 56 reflects moderate overall profile with moderate momentum, moderate value, moderate quality, moderate sentiment.
A Zacks analyst report published Thursday flagged Phillips 66 and Par Pacific Holdings as refiners positioned to benefit from crude oil trading below $70 a barrel. Lower feedstock costs tend to widen crack spreads, the report said, particularly for operators with complex units that can process heavier, cheaper grades.
Phillips 66 runs 13 refineries in the U.S. and Europe with combined throughput above 2 million barrels a day. Its coking and catalytic cracking capacity gives it flexibility to shift toward discounted crudes when benchmark grades like WTI and Brent slide. Par Pacific, a smaller independent with refineries in Hawaii, Washington, and Wyoming, relies on regional supply advantages and its logistics network to capture similar margin gains.
The thesis hinges on product prices holding steadier than crude. That pattern emerged in late 2023, when WTI fell into the high $60s and gross margins for independent refiners widened by $3 to $5 a barrel in the following quarter, according to company filings and analyst notes from that period. The current WTI settlement near $68.50 – the EIA reported a larger-than-expected crude inventory draw Wednesday, with Cushing stocks at their lowest since December – keeps that setup in play.
A recession that crushes gasoline and diesel demand would eat into product prices and offset the crude cost advantage. The Zacks report flagged demand as the primary watchpoint. Phillips 66, in its most recent quarterly call, pointed to steady U.S. gasoline consumption and growing export demand for distillates.
AlphaScala's proprietary scoring system assigns Phillips 66 an Alpha Score of 56 out of 100, in the Moderate zone. That neutral bias on risk-adjusted momentum and valuation reflects the stock's recent run near $176, close to its 52-week high, which leaves less room for error on the earnings beat.
Par Pacific trades at a steeper discount to its historic multiple. Higher crude volatility could close that gap if margins improve. A prolonged downturn in refining margins would hit PARR harder than larger peers.
A related AlphaScala article earlier this week examined how lower crude prices directly affect Phillips 66's refining segment. Every $1 drop in the cost of a barrel of crude adds roughly $180 million to annual pretax earnings at the company's current throughput, all else equal, the piece noted.
Oil settled near $68.50 a barrel Wednesday. WTI has not closed above $70 since Aug. 10. The next scheduled data point for the crude market – and by extension the refining margin trade – comes from the EIA's weekly petroleum status report due at 10:30 a.m. ET Wednesday. A second consecutive inventory draw would reinforce the tightness narrative. A build would pressure oil lower and test the margin expansion bet from the other side.
Prepared with AlphaScala research tooling and grounded in primary market data: live prices, fundamentals, SEC filings, hedge-fund holdings, and insider activity. Each story is checked against AlphaScala publishing rules before release. Educational coverage, not personalized advice.