Refiners forecast to report decent Q1 earnings on improved cracking margin
SEOUL-- South Korean oil refiners, led by top player SK Innovation Co., are forecast to have logged decent earnings in the first quarter of the year on the back of higher oil prices and improved cracking margins, industry sources said Tuesday.
According to the sources, SK Innovation is predicted to have posted an operating income of 864 billion won (US$756 million) on sales of 11.3 trillion won in the January-March period.
In the first quarter of last year, the refiner reported an operating income of 845 billion won.
S-Oil Corp., the No. 3 refiner here, is predicted to have racked up 391 billion won in operating income on sales of 4.96 trillion won in the first quarter.
The first-quarter operating income of GS-Caltex Corp., the second-largest in the sector, is estimated at 661 billion won, sharply up from 316 billion won a year earlier.
The refining margin stood at an average of $6.9 per barrel and $6.7 per barrel, respectively, in January and February. In March, the comparable figure was almost the same.
Usually, a refiner can generate a profit with a refining margin of $4 or more per barrel.
Refining margins will stay firm this year on the back of solid demand for oil from Asian countries, and demand for power generation will also remain solid.
U.S. refiners are expected to conduct large-scale maintenance work this year, according to Lee Dong-wook, an analyst at Kiwoom Securities. "Local players will benefit from firm demand amid tight supply," said Lee.
Refiners in South Korea racked up record earnings last year largely due to improved cracking margins, inventory gains and solid demand for petrochemical products.
The country's four major oil refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank Co. -- logged a combined operating income of 8.03 trillion won last year, an all-time high figure.
Industry leader SK Innovation already posted a record operating income of 3.23 trillion won last year, while No. 2 GS Caltex logged an operating income of 2.14 trillion won.
Source: Yonhap News Agency