SK Innovation, S-Oil, GS Caltex, and HD Hyundai Oilbank, the four domestic refiners that posted weak results in the first half, are expected to swing to a profit in the third quarter. International refining margins have surged due to supply disruptions from major oil-producing countries.
According to the refining industry on the 27th, SK Innovation will release third-quarter results on the 31st of this month. According to FnGuide, SK Innovation's third-quarter revenue is estimated at 19.526 trillion won, up 10.6% from a year earlier, with operating profit of 254.4 billion won, marking a swing to a profit.
S-Oil, which will release results on Nov. 3, is expected to swing to a profit with estimated third-quarter revenue of 8.1968 trillion won, down 7.3% from a year earlier, and operating profit of 250.4 billion won. Unlisted GS Caltex and HD Hyundai Oilbank have similar business structures and are also expected to post profits.
The Singapore complex refining margin, which affects refiner results, has risen to the $13-per-barrel (158.9 liters) range this month. The refining margin is the price obtained by subtracting crude purchase costs and other expenses from petroleum product selling prices, and is a key indicator of profitability in the refining industry.
Refining margins fell to the $5 range earlier this year due to the economic slowdown, and the four domestic refiners posted a combined operating loss of 1.3511 trillion won in the first half (January to June). The break-even point is generally seen as $4–$5 per barrel.
Supply disruptions in major oil-producing countries such as Russia, the United States, and the Middle East are cited as the backdrop for rising refining margins. Ukraine struck Russian refining facilities in August, and since then Russia's daily refining volume has fallen to 5 million barrels, the lowest since April 2022. That is 7% below the historical August average production.
A fire at a Chevron refinery in California earlier this month also reduced output, affecting supply. As operating rates at major U.S. refineries fell, uncertainty in petroleum product supply increased.
Even if third-quarter results improve, the refining industry still sees significant uncertainty. There are many factors that could push down international oil prices, including U.S. tariffs, the U.S.-China trade war, and excess crude supply from the Middle East. If international oil prices fall, refiners' inventory valuation losses on crude secured in advance increase. The International Energy Agency (IEA) forecast that oil prices will fall in the fourth quarter (September to December) due to a sharp rise in global crude inventories.
A refining industry official said, "Although third-quarter results have not yet been released, we believe the worst has passed as refining margins have risen. However, the oil price outlook is not good, and tariff negotiations remain, so there is still a lot of uncertainty."