Oil Refining Industry's 'Nightmare Becomes Reality'... Worst 'Earnings Shock'

S-OIL Posts 1 Trillion Won Loss in Q1... Refining Sector's Total Losses Expected to Reach 4 Trillion Won

[Asia Economy Reporter Park So-yeon] The nightmare of an 'earnings shock' in the refining industry has become a reality. S-OIL, the first among the four major domestic refiners to release its Q1 results, announced an operating loss of 1 trillion won in just three months, equivalent to two years' worth of operating profit. This marks the largest quarterly loss since S-OIL's founding in 1976, reflecting the crisis faced by the refining industry amid the COVID-19 pandemic.

According to industry sources on the 28th, S-OIL reported consolidated Q1 sales of 5.1984 trillion won and an operating loss of 1.0073 trillion won. This loss is more than three times the previous largest operating loss recorded in Q4 2018 (333.5 billion won loss). The significant decline in petroleum product prices and sales volume due to reduced demand caused by the spread of COVID-19 had a major impact. Recently, the sharp short-term drop in international oil prices resulted in inventory-related losses amounting to 721 billion won.

S-OIL's performance is just the beginning. The situation for other refiners is expected to be even more severe. Industry forecasts predict that the combined operating losses of the four major refiners in Q1 could approach 4 trillion won. This far exceeds the worst-ever losses recorded in Q4 2014 (1.15 trillion won operating loss).

For SK Innovation, the industry leader, a Q1 loss of up to 1.7 trillion won is anticipated. GS Caltex and Hyundai Oilbank are also expected to incur operating losses exceeding 500 billion won each. All three companies are estimated to record losses in Q1 alone that surpass their total operating profits from the entire previous year.

The outlook for Q2 is even bleaker. Unless international oil prices rebound sharply in May and June, inventory valuation losses are likely to continue in Q2. Additionally, with global travel restrictions tightening and normalization delayed, refining margins centered on gasoline and jet fuel are expected to remain sluggish.

This content was produced with the assistance of AI translation services.