Refining Margin $5.8 for 2 Consecutive Weeks
Supply ↓ Due to US Hurricane
Demand Rises with Vaccine Rollout
[Asia Economy Reporter Hwang Yoon-joo] Refining margins, which had been below the breakeven point (4-5 dollars) since COVID-19, are soaring. This is thanks to increased oil demand, driven by expanded vaccination rates and the global economic recovery, amid worldwide refiners lowering their facility operating rates.
According to the industry on the 26th, Singapore complex refining margins recorded $5.2 per barrel for the second consecutive week in September. This is the first time since COVID-19 that refining margins have exceeded $5.
The recent sharp reversal and rise in refining margins are due to refiners minimizing their facility operating rates while oil demand is gradually increasing. In Korea, the refining industry's facility operating rate has remained in the low 70% range since COVID-19.
Meanwhile, vaccination rates are rapidly increasing, especially in advanced countries, and some countries like the UK have entered the 'With Corona' (gradual return to normal life) phase. As oil demand, centered on transportation fuels such as gasoline and diesel, increases, refining margins have also risen.
Accordingly, the earnings outlook for the refining industry is positive. According to FnGuide, SK Innovation's estimated Q3 earnings are 465.9 billion won, with a turnaround to profit expected compared to the same period last year. S-OIL is also expected to turn a profit with 472.7 billion won. GS Caltex and Hyundai Oilbank are likewise expected not only to return to profitability but also to see operating profits rise compared to the first half of the year.
An industry official explained, "Due to the occurrence of hurricanes in the US, facility operating rates have dropped further, reducing supply," adding, "On the other hand, with expanded vaccination and increased demand during the driving season, refining margins have risen, making the second half earnings outlook more positive than last year."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
