Key Highlights

● Phillips 66 posted a strong quarter on high refinery utilization.

● The company raised its dividend.

● West Texas Intermediate crude settled at $102.78 a barrel.

● The jump followed a claimed attack on a Saudi refinery.

Phillips 66 (NYSE:PSX) moved higher on Wednesday, October 28, after a strong quarterly report and a dividend increase gave investors reasons to buy into the refiner on the S&P 500.

The gain came on a day when energy was one of the market's leading sectors, powered by a jump in crude prices.

Strong Refining Results

Phillips 66 posted a strong third quarter, driven by high refinery utilization, according to market reports. Running refineries close to full capacity allows a refiner to spread its fixed costs over more barrels and capture more profit when the gap between crude costs and fuel prices is favorable.

The company also raised its dividend, returning more cash to shareholders. Phillips 66 is one of the largest independent refiners in the United States, turning crude oil into gasoline, diesel, jet fuel and other products, and also operating midstream pipelines, a chemicals joint venture and a fuel marketing business.

Oil Back Above $100

Crude prices rallied on Wednesday. West Texas Intermediate settled at $102.78 a barrel, up $2.88 and back above $100, while Brent settled at $115.32.

The jump followed a claim by Yemen's Houthis of a ballistic-missile attack on Saudi Arabia's Ras Tanura refinery on October 27. Riyadh has not confirmed the attack. Weekly government data showed US crude inventories fell by 1.89 million barrels, while gasoline stocks rose by 3.87 million barrels, according to the Energy Information Administration.

Refiners Do Not Simply Follow Crude

Refiners do not simply benefit from high oil prices. Their profits depend on the spread between what they pay for crude and what they earn selling refined products, so strong operations and demand for fuel matter as much as the price of a barrel.

Elsewhere in refining, HF Sinclair (NYSE:DINO) reported record quarterly profit, with earnings of $11.75 a share against estimates of $7.65, according to market data. Energy and technology led the sectors that day, while utilities and real estate lagged as long-dated Treasury yields climbed.

What to Watch

Geopolitics remain a key driver for energy stocks. Analysts have flagged the risk of renewed US strikes on Iran after the November 3 midterm elections, and Qatar presented Iran with a new draft deal that an Iranian official called unacceptable, according to reports.

On Thursday, the advance third-quarter GDP estimate and September PCE inflation data arrive at 8:30 a.m. ET. Elevated oil prices have fed into inflation worries, and the data will shape expectations for a possible December rate hike. Caterpillar (NYSE:CAT), Mastercard (NYSE:MA) and Merck (NYSE:MRK) report before the open, with Amazon (NASDAQ:AMZN) after the close.