Refiners shine after devastating performance in 2020

15-May-2021 Intellasia | KoreaTimes | 7:15 AM Print This Post

The country’s four major oil refiners ― SK Innovation, GS Caltex, S-OIL and Hyundai Oilbank ― saw their first-quarter earnings rebound owing to surging global oil prices and global economic recovery. Industry analysts said the oil refiners overcame the past year’s slump caused by the COVID-19 pandemic and the upward trend would continue in the following quarter as well.

Due to the decreased demand for oil after the virus outbreak and oil price plunge, the four companies recorded operating losses of over 4.4 trillion won ($3.9 billion) in total in the first quarter of 2020, but their overall operating profit came to 2.2 trillion won during the same period this year.

Among the four companies, SK Innovation was the last one to announce its January-March earnings performance. On Thursday, the company said it generated 9.2398 trillion won in sales and 502.5 trillion won in operating profit.

The company said a recovery in oil refining margins helped the firm see the increased profits as its petrochemical business posted an operating profit of 416.1 billion won in the first quarter.

Park Han-saem, a researcher from SK Securities, said, “SK Innovation’s value will increase thanks to the improvement of the refining business in the short run, and the expansion of the EV battery and separator business in the long run.”

Before SK’s announcement, S-OIL was the first one who announced its performance turned to black in the first quarter compared to the same period last year. On April 27, the company said its sales came at 5.3 trillion won and posted an operating profit of 629.2 billion won. Following S-OIL, Hyundai Oilbank logged an operating profit of 410 billion won and GS Caltex with 630 billion won.

They said the price hike of global oil prices are the biggest contributor to their enhanced performance. The global oil prices remained at around $40 per barrel in the fourth quarter of 2020, but the figure now stays close to $70 per barrel.

Also the benchmark Singapore complex margin, which stayed at around $1 in 2020, has shown signs of recovery as the margin rose to $3.20 in late April from $2.80 in late February. According to KB Securities, the margin is expected to rise further in the second half of 2021 due to a low inventory level of oil products.

To cushion the possible impact from decreasing demand for oil products with demand for renewable energy being expected to soar, the oil refiners are shifting their focus to petrochemical and hydrogen businesses.


Category: Korea

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