P66 Runing Refineries Hard Despite Recent Setbacks

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Written by Daniel Graeber for IIR News Intelligence (Sugar Land, Texas)

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Summary

Phillips 66 said its refinery utilization rate was above 90% during third quarter. That's done little to address the inflationary strains coming from higher prices for fuels.

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SPR Bailout

With the Trump administration fretting over higher commodity prices and their impact on inflation, Phillips 66 said it ran its refineries at close to full throttle during the third quarter while at the same time dealing with a series of disruptions.

Industrial Info is keeping close tabs on the U.S. refinery sector. A refinery in Kentucky operated by Marathon shut down briefly in mid-October, after completing maintenance on several units at the Catlettsburg plants early this year.

Elsewhere, the Energy Department said last week it would offer up to 400,000 barrels of crude oil from the Strategic Petroleum Reserve (SPR) in an exchange with Philips 66 as it copes with issues at its refinery in Lake Charles, La.

"This emergency exchange helps alleviate supply disruption and requires Phillips 66 to return more barrels to the SPR than are currently being withdrawn, saving hardworking taxpayers millions of dollars and delivering on the Trump Administration's commitment to strengthen and safeguard America's energy security," said Energy Under Secretary of Energy Kyle Haustveit.

Data from Industrial Info the plant has a capacity of 260,000 barrels per day (bpd).

Last week, meanwhile, U.S. Energy Secretary Chris Wright said President Donald Trump would provide up to $150 million to help expand domestic refinery production. The administration was also looking for ways to revive already-shuttered facilities to stimulate the market.

Good for Companies, Bad for Consumers

The Energy Department, however, has shown successive weeks where refinery utilization was above 90% nation-wide. For consumers, energy-market issues in general are a concern given the fuel-related impact on inflation.

Federal data show consumer-level inflation rose 3.7% annually to September, well above the target rate of 2% set by the Federal Reserve, and energy was the largest contributor overall. The energy component of the Consumer Price Index showed a 20.4% annual increase to September, while gasoline and diesel prices remain nagging issues for taxpayers.

On Wednesday, auto club AAA put the national average retail price at $4.25 per gallon of regular unleaded gasoline and $6.35 for diesel. Those prices are up 40% and 73% year-on-year, respectively.

Much of the issue is driven global events rather than the domestic refinery sector, however. Phillips 66 said its refinery utilization was 98% during the third quarter, showing there's not much more the company can do, even with federal support.

Fuel prices, meanwhile, are determined by movements in the crude oil market, which is impacted by global events. Conflict in the Middle East has added a geopolitical risk premium to crude oil prices, with the U.S. federal government expecting the price of Brent crude oil to average $96 per barrel this year, compared to $69 per barrel in 2025.

Brent was trading at around $111 per barrel early Wednesday. The premium on crude oil prices stems from issues with maritime traffic in the Middle East, where waters hosted around a quarter of the world's waterborne trade in oil and liquefied natural gas before the conflict began.

On Wednesday, the United Kingdom Maritime Trade Operations Center said several craft were harassing shippers within the Gulf of Aden, situated south of Yemen.

The conflict, and the subsequent boost to crude oil prices, is paying off for energy companies, however. Phillips 66 reported adjusted net income of $5.6 billion for the third quarter, a 48% improvement over the previous period.

Key Takeaways

• Refineries don't have much more room to run amid a high-commodity price environment
• Phillips 66 saw its adjusted net income jump 48% from the second quarter.

By the Numbers

• 400,000 barrels of SPR crude to Phillips 66 in federal exchange
• $6.35 for diesel, even with higher refinery utilization rates

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