Oil prices surge and break through hedging positions! Phillips 66(PSX.US)crude oil short positions are "bloodied" Q1 is expected to suffer a $1 billion loss

Zhitong Finance APP learned that one of the largest U.S. refiners, Phillips 66 (PSX.US), expects that due to the war in the Middle East, crude oil and related fuel prices have surged significantly, and the company will suffer nearly a $1 billion loss in the first quarter from its short positions in crude oil and other related commodity derivatives contracts.** According to a regulatory filing submitted on Monday, the refiner expects that its standard net short positions in derivative contracts related to crude oil, refined petroleum products, natural gas liquids, and renewable fuel feedstocks will result in a negative impact of about $900 million.

Although Phillips 66 expects that its short positions in contracts that track commodity prices will lead to losses, as prices rise, the value of the physical crude oil and fuels the company holds increases, and the losses from these financial hedges may be partially offset.

The war in the Middle East has disrupted transportation through the key shipping lane, the Strait of Hormuz. About one quarter of the world’s seaborne crude oil needs to be transported through this waterway. Since the conflict began, U.S. crude oil prices have risen by nearly 68%, while diesel futures have risen 62%.

Due to the increase in commodity prices, Phillips 66 also paid about $3 billion in collateral expenses for its derivative positions. The company then added a $2.25 billion term loan with a 364-day maturity, and expanded another asset securitization financing facility from $1.25 billion to $1.75 billion.