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Market Getting Pumped as Phillips 66 Readies Its 3Q16 Results

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Part 3
Market Getting Pumped as Phillips 66 Readies Its 3Q16 Results PART 3 OF 6

How Has PSX Stock Performed ahead of Its 3Q16 Earnings?

Performance of PSX stock

Refining stocks such as Phillips 66 (PSX) have been putting up a volatile performance due to unstable refining margins. However, this is in contrast to 2015 when refining stocks were on an upward spiral. In 2016, from the end of February to the end of April, refining cracks strengthened. Refining margin indicators of major refining companies also showed improvements.

PSX stock rose 25.0% from October 2014 to the end of April 2016. However, from the end of April to the end of June, cracks showed a mixed trend, with some areas witnessing weakness and some remaining flat. PSX stock fell 13.0% through the end of June compared to October 2014.

How Has PSX Stock Performed ahead of Its 3Q16 Earnings?

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Since the end of June, refining stocks have risen in anticipation of a better refining margin environment. Phillips 66 (PSX) stock rose 1.0% in 3Q16. During the same period, Delek US Holdings (DK), Alon USA Energy (ALJ), and Marathon Petroleum (MPC) rose 28.0%, 22.0%, and 3.0%, respectively. The iShares Global Energy ETF (IXC) has Phillips 66 (PSX) in its portfolio. The ETF also has a ~5.0% exposure to oil refining stocks.

PSX stock and its correlation to crude oil and natural gas prices

PSX stock shows a positive correlation to crude oil prices. The correlation coefficient of PSX stock compared to WTI (West Texas Intermediate) for the past 12 months is 0.48. A correlation coefficient shows the relationship between two variables. A correlation coefficient value of 0.0–1.0 shows a positive correlation. Zero states no correlation, and -1.0–0.0 shows an inverse correlation.

It also means that on average, a 48.0% movement in PSX stock can be explained by changes in WTI prices. The correlation to natural gas is feeble at 0.06.

The situation remains the same for PSX’s peer Tesoro (TSO). Its correlation to WTI is 0.29. Correlations to WTI for other downstream players such as Alon USA (ALJ), CVR Refining (CVRR), and Northern Tier Energy (NTI) are 0.36, 0.26, and 0.36, respectively.

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