According to market consensus compiled by brokerages, SK Innovation is estimated to have turned out an operating profit of about 2.36 trillion won for the January-March period, sharply rebounding from an operating loss of 44.6 billion won a year earlier.
S-Oil is forecast to have earned around 1.08 trillion won, while GS Caltex and HD Hyundai Oilbank are projected to report operating profits in the mid-1 trillion won range and around 200 billion won, respectively.
The earnings surge came as refining margins spiked after the outbreak of the Middle East conflict in late February disrupted oil flows and tightened fuel supply across Asia.
Singapore complex refining margins — a key profitability benchmark for Asian refiners — jumped from $5.7 per barrel in February to $16.5 in March, more than tripling the industry break-even level of around $4-$5 per barrel.
The rise in margins coincided with a sharp rally in global crude prices.
Dubai crude, the benchmark most relevant for Asian refiners, climbed to $100.46 per barrel as of April 30 from $61.08 at the end of last year, a gain of 64.5 percent. Brent crude surged nearly 94 percent over the same period to $118.03, while U.S. benchmark WTI advanced 86 percent to $106.88.
The widening spread between crude procurement costs and refined fuel prices effectively turned South Korean refiners into one of the few major beneficiaries of the regional supply shock.
“Amid the Iran war, Korean refiners became virtually the only suppliers in the Asia-Pacific region capable of securing relatively cheaper feedstock for domestic supply while exporting products at elevated margins,” said Jeon Woo-je, an analyst at KB Securities. “The favorable market cycle could continue beyond previous boom periods through the end of next year.”
South Korean refiners, which rank among the world’s top five in refining capacity, generate roughly 50 to 70 percent of sales from exports, allowing them to capitalize aggressively on overseas shortages of gasoline and diesel.
The headline earnings may overstate the sector’s underlying profitability.
Market estimates suggest that roughly 40 to 50 percent of first-quarter operating profit stemmed from inventory-related gains rather than structural improvement in refining operations.
Refiners typically hold three to four months of crude inventories, while imported oil takes four to eight weeks to arrive and enter production. During periods of rising oil prices, refiners process cheaper crude purchased earlier while selling refined products based on current elevated market prices.
The timing effect temporarily inflates margins, but the reverse occurs once crude prices begin to decline.
The concern is that refiners are now replenishing inventories at sharply higher prices. Because refining is a continuous-process industry requiring uninterrupted crude purchases regardless of market conditions, companies are reinvesting first-quarter profits into substantially more expensive replacement barrels, particularly as alternative crude supplies command steep premiums following disruptions to Middle Eastern shipments.
Analysts estimate that every $1 change in crude oil prices affects the combined earnings of the four refiners by more than 100 billion won.
Domestic policy pressure has also challenge their profitability.
Under a government “maximum price guideline” introduced in March to contain inflation, refiners were required to cap domestic fuel prices despite surging global energy costs, limiting margins in the local market compared with exports.
Industry estimates suggest cumulative losses linked to the pricing measure have already exceeded 3 trillion won.
Although the government pledged compensation, disputes are expected over reimbursement calculations as a 4.2 trillion won emergency reserve fund nears depletion.
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