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Korean Oil Refiners’ Margin Hit This Year’s High

Korean Oil Refiners, South Korean oil refining
South Korean oil refining companies’ refining margin recently hit this year’s high.

It has been found that South Korean oil refining companies’ refining margin recently hit this year’s high based on an increasing demand for diesel in China and Europe. For instance, the Singapore gross refining margin reached US$7 per barrel in the first week of this month.

Previously, the refining margin fell from US$6.9 to US$5.8 per barrel between January and March this year and moved between US$6 and US$6.9 in the second quarter, raising concerns over a decline in their operating profits. Besides, the international oil price dropped from over US$50 to US$40 or so per barrel in June. This month, however, the refining margin rebounded although the oil price is still low. This is because the diesel refining margin raised the gross refining margin based on the increasing demand in Europe and China.

Another reason is Chinese oil refining companies’ regular repair and maintenance that lowered their capacity utilization to 60% to 70%. U.S. oil refining companies have raised their capacity utilization up to 93.6% to take this opportunity.

According to industry sources, the South Korean oil refining companies’ quarterly sales performance is likely to get worse in the second quarter due to the low oil price but they are expected to make a breakthrough in the second half of this year as the refining margin continues to rise. It is in this regard that SK Innovation recently decided to make an interim dividend payment for the first time since its inception and S-Oil and Hyundai Oil Bank are looking to follow suit.

The Original Posted by Jung Min-hee/Business Korea