BMO Sees Phillips 66 (PSX) Breaking into New Highs

Phillips 66 (NYSE:PSX) has been on a strong rally this year, posting gains of over 110% since the beginning of 2026. The outperformance has been driven by an unusually sharp surge in global refining margins amid the war in the Middle East, which has significantly tightened the world's refining capacity and reduced supplies of gasoline, diesel, and jet fuel.

Given Phillips 66's substantial outperformance compared to the wider market, investors may be questioning whether the stock's record-setting run has reached its peak. However, the analysts over at BMO Capital see further upside ahead. On September 17, the firm raised its price target on PSX from $260 to $310, while maintaining an 'Outperform' rating on the shares. The target boost implies an upside of 13% from the current levels and even exceeds the stock's all-time high of over $274 achieved earlier this month.

BMO Capital highlighted Phillips 66's integrated business model, noting that it has gained momentum and outperformed its individual segments, supported by strong execution across the portfolio. While Refining and Renewables remain the cyclical leaders, BMO also sees a favorable medium-term growth outlook for the company's Midstream business.

The Refining Windfall Keeps Rolling:

BMO Capital's vote of confidence comes amid a broader optimism surrounding Phillips 66, with analysts from Morgan Stanley, Raymon James, UBS, and several others also improving their respective outlooks on PSX. This suggests that Wall Street expects the ongoing refining upcycle to last longer than previously expected, particularly following the renewed escalations between Iran and the United States.

The supply disruptions now extend beyond the troubled region, as a recent wave of Ukrainian attacks on Russian refineries has further reduced global refining capacity and provided further support to margins.

Phillips 66 has already demonstrated that it can convert the unusually favorable refining environment into material earnings and cash flows. The company's net income came in at $3.85 billion in the second quarter, up from $877 million a year ago, and marking its strongest ​quarterly profit since Russia's invasion of Ukraine in 2022.

The stronger cash generation has enabled Phillips 66 to improve its balance sheet, with net debt falling by nearly 25% sequentially to $16.5 billion. The refiner remains on track to reduce its net debt to below $16 billion by the end of 2026. A lower debt burden means less cash is required for interest and debt-related obligations, leaving more of the company's cash generation available for shareholders.