Phillips 66 Plunges 2.3% Amid Biofuel Policy Backlash—Is This the Start of a Sector-Wide Shakeout?

Summary
• Phillips 66 (PSX) slumps 2.3% to $125.46, breaking below key 30-day support at $124.70
• Sector leader Valero Energy (VLO) mirrors the decline with a 3% intraday drop
• AFPM letter criticizes Trump-era biofuel mandates, targeting renewable diesel margins
• Options market shows aggressive bearish positioning with 4x turnover in 120-strike puts

Phillips 66 is under intense pressure as the refining sector faces a policy crossroads. With the stock sinking to a 52-week low of $124.24 and a bearish MACD crossover, the AFPM’s regulatory push against ethanol mandates has triggered a sector-wide selloff. The move highlights deepening tensions between legacy refiners and the Biden administration’s green energy agenda.

AFPM’s Regulatory War Ignites Margin Fears
The American Fuel and Petrochemical Manufacturers (AFPM) has escalated its campaign against federal biofuel policies, directly challenging the Renewable Fuel Standard (RFS) and ethanol mandates. The group’s letter to Congress warns that Trump-era proposals to double biofuel blending requirements and halve foreign feedstock credits will erode refining margins. Phillips 66 and Valero Energy, both AFPM members, have already announced plans to throttle biofuel output due to poor margins. The regulatory uncertainty has triggered a flight to safety in the sector, with PSX’s price action mirroring the broader refining index’s breakdown.

Refining Sector in Synchronized Retreat
Valero Energy (VLO) is leading the sector’s decline with a 3% intraday drop, underscoring the systemic risk of AFPM’s policy arguments. The refining index’s technical deterioration—marked by a 120-day moving average crossover—suggests broader capitulation. While Phillips 66’s 52-week low at $124.24 is a new catalyst, the sector’s synchronized selloff indicates a structural shift in investor sentiment toward energy transition risks.

Bearish Positioning and Key Technical Levels for PSX
• 52W High: $140.85 (17% above current price)
• 52W Low: $91.01 (35% below)
• RSI: 46.02 (oversold territory)
• MACD: -0.39 (bearish crossover)
• 200D MA: $121.07 (critical support)

The technical landscape for PSX is bearish across multiple timeframes. The stock is trading below its 30-day MA of $125.47 and the 200-day MA of $121.07, with RSI in oversold territory suggesting further downside. The options market is aggressively positioning for a continuation of the move, with two contracts standing out for bearish exposure:

• PSX20250808P120 (Put, $120 strike, 2025-08-08 expiration)
- Implied Volatility: 34.32% (moderate)
- LVR: 155.17% (high leverage)
- Delta: -0.198 (moderate sensitivity)
- Theta: -0.078 (moderate time decay)• PSX20250808P127 (Put, $127 strike, 2025-08-08 expiration)
- Implied Volatility: 27.00% (moderate)
- LVR: 42.61% (high leverage)These options offer asymmetric risk/reward for a continuation of the bearish thesis. The 120-strike put balances leverage and liquidity, while the 127-strike put provides higher gamma for rapid price swings. Aggressive bears should consider the 120-strike for a 5% downside target, while the 127-strike offers stronger theta decay for a shorter-term play. Watch for a breakdown below $121.07 to confirm the bear case.

Backtest Phillips 66 Stock Performance
The backtest of the Philippine Stock Exchange (PSX) after an intraday plunge of -2% shows favorable short-to-medium-term performance. The 3-Day win rate is 53.25%, the 10-Day win rate is 54.62%, and the 30-Day win rate is 57.53%, indicating a higher probability of positive returns in the immediate aftermath of such a significant drop. The maximum return during the backtest period was 6.14%, which occurred on day 59, suggesting that while there is some volatility, PSX tends to recover and even exceed its pre-plunge levels in the following days.

Position for a Sector-Wide Energy Transition Reassessment
The AFPM’s regulatory campaign has triggered a reevaluation of refining sector fundamentals, with Phillips 66 at the center of the storm. The 200-day MA at $121.07 is the next critical level to watch—if PSX breaks below this, the path to $115 becomes more likely. Investors should monitor Valero Energy (VLO) at -3% as a barometer for sector-wide sentiment. With the options market pricing in significant downside, the most prudent approach is to short the 120-strike put for a 5% downside target or consider a short-term play on the 127-strike. Position sizing should reflect the high volatility, but the current setup offers a compelling case for bearish positioning in the refining sector.