Oil Industry's First Half Operating Rate at 72.3%... Similar Level to the Second Oil Shock

Oil Demand Recovery After COVID-19 Delayed Beyond Expectations
Maintaining Lowest Operating Rates While Managing Profitability

[Asia Economy Reporter Hwang Yoon-joo] The operating rate of refining facilities of domestic oil refiners in the first half of this year has fallen to the lowest level ever at the 72% range. This is the result of refiners adjusting their operating rates to manage profitability as the outlook for oil demand recovery has been mixed due to the ongoing COVID-19 pandemic since last year.

According to the refining industry on the 19th, the average operating rate of refining facilities of the four domestic refiners in the first half of this year was 72.3%. This is 5.8 percentage points lower than the 78.1% operating rate in the first half of last year when oil demand sharply froze due to the COVID-19 pandemic, and is similar to the global refining facility operating rate of 71%, which was the lowest ever recorded during the second oil shock in 1979. The domestic refining facility operating rate in the first half of 2019, before the COVID-19 pandemic, was 84.4%.

Among the four refiners, SK Innovation recorded the lowest operating rate in the 60% range, while S-OIL maintained the highest rate in the 90% range.

The reason why the refining facility operating rate fell to the lowest level ever in the first half is that the refining industry adopted a survival strategy focusing on conservative facility operation and production of high-margin lubricants and petrochemicals in response to the rapidly spreading global COVID-19 pandemic since March 2020. As oil demand recovery was delayed, the crude oil refining facility operating rate was lowered, and chemical products such as PP were produced using low-priced high-sulfur heavy oil as raw material. Thanks to this, refiners that recorded a loss of 5 trillion won in the first half of last year were able to record an operating profit of 3.8995 trillion won in the first half of this year.

An industry official said, "After COVID-19, the refining industry is expected to maintain a low operating rate and reduce the scope of refining business while strengthening high-margin businesses such as petrochemicals. In addition, profits are being maximized by producing chemical products using high-sulfur heavy oil."

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