Short interest in Phillips 66
Short interest in Phillips 66 (PSX), expressed as a percentage of outstanding shares, has fallen from 1.9% at the end of May to the current level of 1.6%. Usually, everything else being equal, a fall in short interest could indicate a decrease in the bearish sentiment toward a stock. Since May, Phillips 66’s stock price has risen 10%.
Why the fall in bearish sentiment?
The fall in short interest in Phillips 66 since the end of May could be attributed to the improving refining environment. The benchmark crack, US Gulf Coast WTI (West Texas Intermediate) 3-2-1 crack, had risen 19% from the end of May until August 23, 2017—before Hurricane Harvey hit.
But refining cracks significantly impact the earnings of downstream companies. Since the hurricane, the crack has risen 50%, but the true hurricane impact will be captured in the next available short interest data.
The fall in short interest in Phillips could be due to its 2Q17 earnings, which exceeded estimates. Phillips 66 saw a 14% rise in its adjusted net income mainly led by better refining earnings. (For more on this, you can refer to Market Realist’s “Phillips 66: 2Q17 Earnings Beat Estimates, Refining Earnings Rose.”)
Peer short interest
PSX’s peers Delek US Holdings (DK), HollyFrontier (HFC), and Valero Energy (VLO) have also witnessed a fall in their short interest by 3.2%, 0.20%, and 0.17%, respectively, since the end of May. DK, HFC, and VLO have short interests of 5.3%, 6.8%, and 3.9%, respectively.
On an absolute basis, the short interest levels are higher for DK, HFC, and VLO than for PSX. Since the end of May, DK stock has risen 2.3%, but HFC and VLO have risen 32.5% and 12.0%, respectively.
Continue to the next part for a closer look at Phillips 66’s financial position.