Phillips 66 beat analysts’ estimates for quarterly profit on Friday, as the refiner benefited from higher retail fuel margins, sending its shares up 4.4% to their highest in more than a year.

The Houston, Texas-based company, which retails fuel under brand names such as Conoco, 76 and JET, buys refined products from the market and resells them across its about 9,000 outlets spread across the United States and Europe.

Source: Reuters/Rick Wilking

The business, marketing & specialties, was helped by an 18% drop in crude prices in the third quarter that reduced the cost of the refined products like gasoline and aviation fuel.

“The beat was driven by stronger-than-expected results across all segments, but marketing & specialties particularly exceeded our expectations,” Morgan Stanley analysts wrote in a note.

Marketing fuel margins of $2.11 per barrel in the United States and $6.37 per barrel internationally was about 30-60% higher than the brokerage’s estimates.

Adjusted earnings in the unit rose nearly 30% to $498 million in the third quarter.

Profit in its midstream segment, which transports and stores crude, natural gas liquids (NGL) and exports liquefied petroleum gas, jumped more than 40% on the back of higher pipeline volumes and hydrocarbon trading.

Houston-based Phillips 66 has been beefing up its midstream assets, expanding its U.S. Gulf Coast NGL market hub, as well as adding storage capacity at Texas-based Clemens Caverns facility and Beaumont Terminal.

However, adjusted earnings at its largest refining segment slumped nearly 34% due to higher turnaround costs and as margins fell 16% to $11.18 per barrel.

The company’s refineries had worldwide crude oil capacity utilization rate of 97% during the quarter, compared with 93% a year earlier.

Net earnings more than halved to $712 million, or $1.58 per share, in the three months to Sept. 30.

Excluding a $690 million impairment related to investments in DCP Midstream LP, the company earned $3.11 per share, beating estimates of $2.59, according to IBES data from Refinitiv.

Smaller rival Valero Energy beat profit estimates on Thursday, thanks to cheap light crude from the prolific U.S. shale oil basins.

“Refining earnings are off to a very strong start with both PSX and VLO beating Street estimates and we expect other refiners especially Marathon Petroleum Corp and HollyFrontier Corp to follow with solid beats,” Credit Suisse analyst Manav Gupta said in a note.

Shares of Phillips 66 were trading up 4% at $115 in early trading. They have gained more than 28% this year to Thursday’s close.

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