S-Oil sees refining margins improving after first-quarter operating loss
S-Oil, South Korea’s third-largest refiner, said that refining margins are likely to improve in the second quarter as countries reopen businesses that were closed to try to contain the coronavirus pandemic.
S-Oil posted an operating loss of 1 trillion won ($815.16 million) for the January-March period, compared with an operating profit of 270 billion won over the same period a year earlier. It cited inventory-related losses because of the slump in oil prices and a collapse in fuel demand because of travel restrictions.
The coronavirus pandemic, which has infected nearly 3 million people worldwide, has eroded global fuel demand by about 30% as airliners have reduced flights and countries have imposed travel restrictions and lockdowns.
Looking ahead, the refiner, whose major shareholder is Saudi Aramco (2222.SE), said in a statement that, refining margins would gradually “bottom out” in the second quarter, while refiners are expected to cut back their operations in the region.
“April (refining) margins are still not good and it’s not easy to return to profits. However, as official selling prices of Saudi crude oil for April and May shipments are cut, that would help refining margins improve in May and June,” Cho Yong-kuk, S-Oil’s treasurer told analysts in a call.
Asia’s benchmark refining margins DUB-SING-REF, profits from processing a barrel of Dubai crude into refined products, have averaged -$0.82 a barrel so far in April, down from an average of $1.18 a barrel in the first quarter.
The refiner said it would operate its crude distillate units (CDU) at 100% in the second quarter as it can cope with falling demand without lowering run rates.
For planned maintenance this year, it would shut down its 76,200 barrels-per-day (bpd) No.2 residue fluid catalytic cracker (RFCC) and 90,000-bpd No.1 CDU for maintenance in the second quarter and in the third quarter.
S-Oil, which has a 669,000 barrel-per-day (bpd) refinery, operated its crude distillate units at 93.4% on average in the first quarter, down from 97.8% in the fourth quarter, according to the company’s statement.
Shares of S-Oil ended up 1.7% after the earnings announcement, while the wider market .KS11 closed 1.8% higher.
Reporting by Jane Chung; editing by Louise Heavens and Barbara Lewis
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