[Click eStock] "S-Oil, Expecting Improvement in Chinese Crude Oil and Jet Fuel Demand"

IBK Investment & Securities Report

[Asia Economy Reporter Kwangho Lee] IBK Investment & Securities analyzed that S-Oil is expected to benefit from the recovery of China's crude oil demand due to the COVID-19 endemic and the improvement in demand for gasoline and jet fuel. Accordingly, they maintained a buy rating and a target price of 126,000 KRW.

Lee Dongwook, a researcher at IBK Investment & Securities, said, "China's crude oil demand is expected to increase by more than 500,000 B/D (barrels per day) compared to last year," adding, "Recently, the crude oil processing volume of Chinese refineries increased by 160,000 B/D last month compared to the previous month due to increased traffic volume, and it is expected to increase by 200,000 B/D this month as well."

The researcher analyzed, "According to OPEC (Organization of the Petroleum Exporting Countries), China's crude oil demand decreased by 210,000 B/D compared to the previous year for the first time in 20 years last year due to strong COVID-19 lockdown measures, but this year, it is expected to increase by 510,000 B/D compared to last year due to expanded fiscal spending and reopening effects, leading global crude oil demand."

He said, "With the arrival of the driving season in Q2-Q3 this year, gasoline demand is increasing, and the EU's (European Union) ban on imports of Russian petroleum products may cause disruptions in the supply of raw materials needed for product production, potentially limiting gasoline production within Europe," adding, "This could cause additional difficulties in gasoline supply and demand."

Furthermore, he added, "According to the IEA (International Energy Agency), jet fuel will account for 45% (850,000 B/D) of the increase in global oil demand this year due to the recovery of air travel demand," and "S-Oil's petrochemical division (BTX) is also expected to see additional spread improvements this year in Q2 due to regular maintenance such as the pyrolysis gasoline (Pygas) process."