(Bloomberg) — Phillips 66 is maximizing diesel manufacturing to make the most of robust demand and would think about investing in initiatives that give its refineries larger flexibility to tweak gas output to match altering consumption patterns.
The refiner reported second-quarter earnings on Friday that topped analysts’ estimates, with wider-than-expected margins boosting revenue in its fuel-making division 19% from a 12 months earlier.
“Refining margins have been pushed by power in diesel,” Chief Monetary Officer Kevin Mitchell mentioned in an interview. “That could be a operate of very low inventories for distillate in addition to robust demand.”
Phillips 66 would think about initiatives that improve its skill to shift between making gasoline and diesel because the development of low inventories and excessive demand for diesel persists, Mitchell mentioned. The corporate earlier this 12 months accomplished a venture at its refinery in Sweeny, Texas, to permit it to extra simply change between processing heavy and lightweight crudes.
“We’d count on distillate margins to stay robust via the tip of the 12 months,” Brian Mandell, govt vp of promoting and industrial, mentioned on an earnings name Friday. Hurricane season, fall turnarounds after which winter heating demand all assist robust income for producing diesel, Mandell mentioned.
Diesel has been a spotlight for refiners and gas merchants this 12 months after President Donald Trump’s commerce conflict roiled markets, turning speculators bearish on the economic and highway gas, which is carefully tied to the well being of the worldwide economic system. However as diesel inventories dwindled into the summer season months, merchants have boosted bullish bets on the gas, making it a shiny spot for broader oil costs.
“We be ok with the place the economic system is at this time limit, however acknowledge there’s uncertainty,” Mitchell mentioned.
Heading into the second half of the 12 months, OPEC’s manufacturing will increase ought to stress heavy crude costs, benefiting Phillips 66, Mitchell mentioned. On the identical time, about 1.1 million barrels of day by day refining capability is about to shut this 12 months — together with Phillips 66’s Los Angeles refinery — and capability additions in Asia are centered on petrochemicals somewhat than refined merchandise, Mitchell mentioned.
“You set all that collectively, and we’re comparatively bullish on refining for the close to to medium time period,” he mentioned.
(Updates with govt’s remark in fifth paragraph)
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