BUSINESS

Refiners' weak earnings may continue into Q1

By Yonhap
  • Published : Feb 5, 2019 - 11:09
  • Updated : Feb 6, 2019 - 09:34

South Korean refiners, led by SK Innovation Co., may see their weak earnings continue into the current quarter due to a sharp falloff in oil prices and a narrowing refining margin, industry sources said Tuesday.

SK Innovation, the No. 1 player, and other refiners, including GS-Caltex Corp. and S-Oil Corp., reported weaker-than-expected earnings in the fourth quarter of last year due to narrowed margins from their refining business.



A drop in oil prices leads to a rise in valuation losses of their inventories and hurts oil firms' refining margins.

The margin is the difference between the total value of petroleum products coming out of an oil refinery and the cost of crude and related services, including transportation.

Usually, a South Korean refiner can generate profit if the refining margin exceeds $5 per barrel.

But the benchmark Singapore complex gross refining margin was below $3 per barrel last month, compared with $4.6 in November and $5.2 in October. In January of last year, the margin stood at over $6.

Singapore is the regional trading hub of the benchmark Dubai crude.

Local refiners may have to brace for huge valuation losses as well under the current quarter. S-Oil and Hyundai Oilbank Co.

already suffered valuation losses of 300 billion won and 175 billion won, respectively, during the fourth quarter of last year.

SK Innovation and GS-Caltex are forecast to have logged valuation losses of over 200 billion won as well. (Yonhap)



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