Phillips 66 Reports $900M Mark-to-Market Losses in Q1 2026
The refiner disclosed $900 million in pre-tax mark-to-market losses, a $300 million Gulf Coast pricing lag hit, and $3 billion in derivative collateral outflows from the commodity price spike.
The Disclosure
| Item | Amount |
|---|---|
| Pre-tax mark-to-market losses | ~$900M |
| Refining segment (Gulf Coast pricing lag) | ~$300M |
| Net cash collateral outflow on derivatives | ~$3B |
| Cause | Sharp increase in commodity prices |
What Happened
Phillips 66 (PSX) disclosed on April 6 that its Q1 2026 results will include approximately $900 million in pre-tax mark-to-market losses. The refining segment was impacted by $300 million from Gulf Coast pricing lag -- the delay between when crude is purchased and when refined products are sold at updated prices.
The most striking number is the $3 billion net cash collateral outflow on derivatives, driven by the sharp increase in commodity prices during the quarter. When commodity prices move sharply, hedging positions require additional collateral, creating significant cash flow pressure even if the underlying business is sound.
Context
The disclosure confirms from the corporate side what the EIA data shows from the market side. Regular gasoline prices surged 36% in five weeks (late February to late March), while U.S. crude production dropped 618,000 barrels per day in January -- the steepest monthly decline in recent memory.
Phillips 66 is one of the largest independent refiners in the U.S., processing approximately 2 million barrels per day. When commodity prices move this fast, the gap between input costs and output prices creates temporary but significant accounting losses.
What It Means
Mark-to-market losses are paper losses that can reverse as positions settle. The $900 million headline will pressure the stock in the short term, but the more important signal is the $3 billion collateral outflow -- that represents real cash leaving the balance sheet to cover derivative margin calls.
Other refiners with significant hedging books are likely experiencing similar dynamics. Valero (VLO), Marathon Petroleum (MPC), and PBF Energy (PBF) are worth watching when they report Q1 results.
The broader signal: commodity price volatility this quarter has been severe enough to create meaningful balance sheet stress across the refining sector.