[Click eStock] Refining Margin $11.1... Recommended: S-OIL, KCC, Lotte Jeongmil, Kumho Petrochemical, etc.

[Asia Economy Reporter Yoonju Hwang] Hana Financial Investment expects a strong refining margin in 2022 and selected S-Oil, KCC, Lotte Precision, Kumho Petrochemical, and Lotte Chemical as top priority stocks.

On the 3rd, Jaesung Yoon, a researcher at Hana Financial Investment, stated, "The refining margin increased by $0.9 to $10.2 compared to the previous month," adding, "In the latter half of the week, it reached $11.1, marking the highest level in about 4 years and 6 months."

He explained, "Reflecting the rise in crude oil prices, overall price increases are underway, and the margin has passed its worst phase and is now in a stage where improvement is possible," adding, "Encouragingly, gasoline and diesel are leading the strength."

Researcher Yoon summarized three reasons why refining margins are expected to strengthen this year.

He analyzed, "In the short term, ahead of the Beijing Winter Olympics, the operating rate of small private refineries in China (Teapot) fell below 60%, reducing supply pressure."

He also predicted that margins for kerosene and diesel will significantly improve this year due to reduced supply pressure relative to low inventories. Researcher Yoon explained, "A structural point is that diesel and kerosene inventories in Europe, where the transition to electric vehicles (EV) is rapid, are unusually low," adding, "Inventories in the US and Asia are also low due to the 'Gas-to-Oil' switch caused by high natural gas prices."

He continued, "US refiner Valero announced in its Q4 earnings report last year that gasoline demand has recovered to pre-pandemic levels, leading to a tight supply-demand balance," adding, "Diesel demand has also recovered to pre-pandemic levels, and inventories are very low."

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