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A Look at Short Interest in Phillips 66 before Q3 2018

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Short interest in Phillips 66

Short interest in Phillips 66 (PSX) expressed as a percentage of outstanding shares has risen 0.02 percentage points since August 29 to the current 1.17%. Usually, everything else being equal, a rise in short interest could indicate an increase in bearish sentiment for a stock. In that same period, Phillips 66 stock fell 1.7%.

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Why the change in sentiment?

Short interest in Phillips 66 has risen since the end of August. That could be due to the fall in USGC (US Gulf Coast) WTI 3-2-1 crack. The crack has fallen 15.5% since August 29 to the current 15.5%. The crack points to Phillips 66’s likely refining margin trend in the US Gulf Coast area.

The decline in the crack means a possible fall in Phillips 66’s refining margin in the region in the stated period. On a quarterly average basis, the crack was 15% lower YoY (year-over-year) in Q3 2018. So the expectation of lower refining margins and earnings perhaps led to a decrease in positive sentiments for the stock.

Short interest for peers

Short interest in Marathon Petroleum (MPC) has risen 0.69 percentage points since August 29 to the current 7.45%. Short interest in Delek US Holdings (DK) has increased 1.45 percentage points to 5.92%. Since August 29, MPC stock has risen 1.9%, but DK stock has fallen 20.8%.

Series conclusion

In this series, we reviewed Phillips 66’s EPS estimate and refining margin expectation for the third quarter of 2018. We also evaluated the stock compared to the markets and benchmark crack since the beginning of the third quarter. Then we calculated the stock forecast for a 21-day period before October 26. That was based on its current implied volatility.

Then we looked at analysts’ ratings for Phillips 66 and the company’s recent dividend announcement. We concluded the series with a review of short interest in PSX before its earnings announcement on October 26.

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