SEOUL, Nov. 10 (Korea Bizwire) — South Korean oil refiners, led by SK Innovation Co., delivered strong earnings for the third quarter of the year on the back of good refining margins and solid demand for key products, their filings showed on Friday.
SK Innovation Co., the top oil refiner, reported an 87 percent rise in its third-quarter net profit from a year earlier thanks to higher oil prices and improved cracking margins.
Net profit stood at 696 billion won (US$625 million) in the July-September months, compared with a profit of 372 billion won a year earlier, the company said in a regulatory filing.
Operating income more than doubled from a year earlier to reach 964 billion won in the third quarter, with sales rising 17.5 percent to 11.76 trillion won over the cited period.
The refiner said higher oil prices led to a drop in inventory losses and to growth in its petrochemical business.
The benchmark Singapore complex gross refining margin (GRM) hovered around US$5 per barrel during the second quarter, but the figure rose to $10 per barrel in the third quarter, according to market data. Singapore is the regional trading hub of the benchmark Dubai crude.
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.
GS Caltex Corp., the No. 2 refiner in South Korea, also reported a strong third-quarter bottom line. Its third-quarter net profit reached 362 billion won, up 13.6 percent from a year earlier, with operating income surging 76.8 percent on-year to 578 billion won.
S-Oil Corp., the No. 3 oil refiner, also reported that its third-quarter profit more than doubled from a year earlier, largely thanks to higher oil prices and refining margins.
Analysts expected refining margins to remain strong due to high demand, while the supply of oil-related goods remains limited.
Refiners in South Korea racked up record earnings in 2016 largely due to improved cracking margins, inventory gains and good demand for petrochemical products.
The country’s four major oil refiners reported a combined operating income of 8.03 trillion won last year, an all-time high.