Korea Investment & Securities projected on September 7 that global refinery shortages will continue to drive up prices for refined oil products. The firm maintained a 'buy' rating for S-Oil and raised its target price by 20% to 180,000 won.
Lee Chung-jae, a researcher at Korea Investment & Securities, stated, "It is not a shortage of crude oil, but rather a significant shortage of refinery facilities." He noted that the U.S. refinery utilization rate, which has faced no issues with crude supply or refinery operations, reached an all-time high in August.
The U.S. refinery utilization rate climbed to 98% by the end of last month. Analysts attribute supply disruptions to attacks on refineries in Iran and the U.S., as well as operational challenges in Russia due to oil export restrictions following the Ukraine war.
Refined product prices are also on the rise. As of September 4, diesel prices in the U.S. surpassed the all-time high recorded in June 2022. At that time, West Texas Intermediate (WTI) crude was priced at $115 per barrel, while it currently hovers around $90, highlighting the high profitability of refined products.
Lee added, "The fact that higher refined product prices are forming despite lower crude oil prices indicates a real shortage of refinery facilities. Unless there is a decrease in demand from low-income countries in Southeast Asia or a rapid restart of refining facilities in Russia, refining margins are expected to remain high for the time being."
He further stated, "Even if geopolitical risks are resolved, it will take at least 2 to 3 years for refinery operations to normalize. S-Oil will maintain its competitiveness after the resolution of geopolitical risks, as it produces high-quality refined products reliably from crude oil sourced from various regions worldwide."
* This article has been translated by AI.
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