SEOUL, April 5 (AJP) - A surge in oil prices has given domestic refiners a short-term boost, but industry watchers warn that their gains may quickly evaporate as market volatility and supply constraints are expected to continue amid the prolonged conflict in the Middle East.
At least until last month, refiners managed to keep operations steady by relying on existing inventories and alternative supplies, but risks are rising as crude prices swing sharply and securing feedstock becomes increasingly difficult.
As of March, exports of petroleum products including gasoline, diesel, and naphtha surged to US$5.11 billion, with an average unit price of $925 per ton, up 33.3 percent from the same period last year.
Dubai crude, which accounts for the largest portion of South Korea's crude imports, soared to $128.5 a barrel last month, up from $72.5 a year earlier. Over the same period, international gasoline prices rose to $128.8 from $79.6, while diesel jumped to $192.8 from $86.5.
The country's four major refiners - GS Caltex, HD Hyundai Oil Bank, SK Innovation, and S-Oil - which earn over half their revenue from overseas sales, are expected to post stronger first-quarter results thanks to rising exports. Refining margins, which measure the profit from turning crude oil into products like gasoline and diesel, also jumped to $29.3 a barrel in March from $11.8 in February, further boosting their sales, according to Hana Securities.
They were able to maintain operations at certain levels as tankers that had left the Persian Gulf before the Middle East crisis arrived. However, after a 2-million-barrel shipment reached South Korea on March 20, supplies under long-term contracts that usually pass through the Strait of Hormuz reportedly stopped.
Refiners are now turning to spot purchases of Middle Eastern crude that bypasses the Strait of Hormuz, a critical chokepoint for roughly one-fifth of the world's oil supply, while also seeking alternative supplies from the U.S. and Africa. But intensifying competition among Asian refiners is pushing prices even higher.
Some of them are reportedly considering temporary shutdowns, adjusting scheduled maintenance, or cutting operations to minimum levels.
"Until March, we were able to manage with our inventories, but crude and petroleum prices are now highly volatile, making it difficult to predict what comes next," said an industry insider. "The uncertainty is so severe that we can't even see a day ahead."
At least until last month, refiners managed to keep operations steady by relying on existing inventories and alternative supplies, but risks are rising as crude prices swing sharply and securing feedstock becomes increasingly difficult.
As of March, exports of petroleum products including gasoline, diesel, and naphtha surged to US$5.11 billion, with an average unit price of $925 per ton, up 33.3 percent from the same period last year.
Dubai crude, which accounts for the largest portion of South Korea's crude imports, soared to $128.5 a barrel last month, up from $72.5 a year earlier. Over the same period, international gasoline prices rose to $128.8 from $79.6, while diesel jumped to $192.8 from $86.5.
The country's four major refiners - GS Caltex, HD Hyundai Oil Bank, SK Innovation, and S-Oil - which earn over half their revenue from overseas sales, are expected to post stronger first-quarter results thanks to rising exports. Refining margins, which measure the profit from turning crude oil into products like gasoline and diesel, also jumped to $29.3 a barrel in March from $11.8 in February, further boosting their sales, according to Hana Securities.
They were able to maintain operations at certain levels as tankers that had left the Persian Gulf before the Middle East crisis arrived. However, after a 2-million-barrel shipment reached South Korea on March 20, supplies under long-term contracts that usually pass through the Strait of Hormuz reportedly stopped.
Refiners are now turning to spot purchases of Middle Eastern crude that bypasses the Strait of Hormuz, a critical chokepoint for roughly one-fifth of the world's oil supply, while also seeking alternative supplies from the U.S. and Africa. But intensifying competition among Asian refiners is pushing prices even higher.
Some of them are reportedly considering temporary shutdowns, adjusting scheduled maintenance, or cutting operations to minimum levels.
"Until March, we were able to manage with our inventories, but crude and petroleum prices are now highly volatile, making it difficult to predict what comes next," said an industry insider. "The uncertainty is so severe that we can't even see a day ahead."
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