Phillips 66's Midstream Operations Shield Refining Business from Volatility

Phillips 66's refining business is likely to be impacted by high oil prices, currently above $80 per barrel, due to conflicts in the Middle East. However, the company's diversified midstream operations are expected to remain stable and insulated from commodity price volatility.

The U.S. Energy Information Administration projects a higher average West Texas Intermediate price for 2026 at $80.88 per barrel, which could negatively affect Phillips 66's refining activities. Despite this, demand for fuels remains strong, while global fuel inventories are relatively tight, contributing to the profitability of the refining business.

Phillips 66 has diversified its business across midstream and chemicals, investing a significant amount of capital in these areas. Midstream operations generate stable cash flows as assets are used by shippers for long-term periods, making them less vulnerable to commodity price volatility.