Company note · Energy companies · Refining & products
Phillips 66: Oil Price Spike Drives Nearly US$900 Million in Q1 Losses
Why did Phillips 66 expect nearly US$900 million in losses as oil prices surged? The note examines its derivatives exposure and whether the hit represented a temporary dislocation or a wider earnings problem.
Co-authored with Abraham Went.
Full company note: 8-minute read.
How the price spike hit Phillips 66
Derivatives exposure
~50m barrels
Net short crude and product position at end-March 2026.
March price shock
+64% Brent
Brent rose 64% in March 2026 as crude and product prices surged.
Preliminary Q1 impact
~US$900m loss
Expected pre-tax losses announced on 6 April, before the full results.
Exposure, price movement and expected earnings impact are different measures, not additive quantities. The loss estimate was preliminary and subject to closing procedures.
Summary
On 6 April 2026, Phillips 66 said its first-quarter results would include nearly US$900 million of pre-tax losses, after the Iran conflict and the disruption to flows through the Strait of Hormuz drove a rapid rise in crude and product prices. The company held a net short position of around 50 million barrels in crude and product derivatives at the end of March, and those positions moved against it. The figures were preliminary and subject to the company’s closing procedures.
We viewed the loss as a positioning shock rather than a structural operational weakness: the company had reported crude capacity utilisation of 99% in the fourth quarter of 2025. Our view of the shares ahead of the full results was cautiously positive, with the scale of the loss limiting conviction.
Key findings
The expected losses were spread across refining, marketing and specialties, and renewable fuels. The note reads that as a market-driven dislocation, not damage to one business line.
Brent rose 64% in March 2026, its largest monthly increase on record.
The investment case depended on whether the loss proved temporary. Full first-quarter earnings were due on 29 April 2026.
What would change the view
Would weaken the view
- Full first-quarter results, scheduled for 29 April, show the loss was the start of a broader, longer-lasting earnings problem rather than a temporary valuation hit.
- The full results show the mark-to-market damage fed into weaker operational performance, rather than being mostly accounting-driven.
Would strengthen it
- Commodity conditions stabilise; because the losses were spread across segments, the note expects earnings to recover across the portfolio rather than depend on a turnaround in one damaged division.
Conditions as set out in the company note when it was published.
Read the full company note for the complete analysis.
Read the full company note at 6:05 MarketsDated analysis from April 2026. Views reflect the information available at the time and have not been updated. Nothing here is investment advice.