Refining Margin Strength, Operating Profit 858.9 Billion KRW... S-OIL Q3 Earnings Announcement

Low Global Petroleum Product Inventories and Expected Increase in Winter Heating Demand

Shahin Project's External Funding Progresses Smoothly, "Lower Interest Rates Than Market"

S-OIL announced its third-quarter earnings, showing a significant increase in operating profit, on the 30th.

In the third quarter, sales reached KRW 8.9996 trillion with an operating profit of KRW 858.9 billion. Sales increased by 15.1% compared to the previous quarter, influenced by the rise in international oil prices.

Operating profit recorded a substantial increase to KRW 858.9 billion compared to the previous quarter, driven by strong refining margins due to robust demand for petroleum products and the impact of rising oil prices.

S-Oil Q3 Performance Overview.

In the refining sector, Asian refining margins sharply rebounded amid tight supply conditions caused by operational disruptions at regional production facilities, coupled with strong demand during the summer driving season and peak air travel season.

S-OIL explained that Dubai crude oil prices rose due to OPEC+’s extension of voluntary production cuts and a global decline in crude oil inventories.

In the petrochemical sector’s aromatic segment, the PX and benzene markets maintained a solid level, supported by steady demand for aromatic feedstocks used in gasoline blending and new demand from the operation of large-scale downstream facilities in the region.

In the olefin downstream sector, the PP and PO markets showed weakness due to the operation of new regional facilities and weakened downstream demand caused by the slowdown in China’s manufacturing sector.

In the lubricants sector, the base oil spread contracted compared to the previous quarter due to seasonal demand slowdown and the completion of regular maintenance by major suppliers, but still exceeded past average levels.

S-Oil 2022 Q3 Performance by Business Division.

S-OIL forecasts that Asian refining margins in the refining sector will remain solid in the fourth quarter, supported by low global inventories, limited supply growth conditions, and increased winter demand.

It also expects kerosene and jet fuel spreads to continue benefiting from increased heating oil demand in winter and ongoing recovery in travel demand.

Diesel spreads are anticipated to remain firm due to below-average inventory stocking levels and yield adjustments to meet winter kerosene demand.

In the petrochemical sector’s aromatic segment, PX and benzene markets are expected to face some correction due to increased aromatic product production following the seasonal easing of strong gasoline market conditions. However, support is expected from the restart of downstream facilities after scheduled maintenance.

In the olefin downstream sector, the PP and PO markets are projected to gradually recover following improved consumer demand after China’s National Day holiday and operators’ adjustments of facility operating rates based on economic considerations.

In the lubricants sector, the base oil spread is expected to slightly improve due to tight supply caused by regular maintenance and yield adjustments, along with gradual demand recovery.

An S-OIL official stated, “Global petroleum product inventories have fallen below historical ranges due to sustained growth in petroleum product demand throughout the year, driven by recovery in mobility demand,” adding, “The financing for the Shahin project we are pursuing is progressing smoothly.”

They explained that major conditions for loans from the largest shareholder have been negotiated at competitive low interest rates compared to market rates, and bank borrowing agreements have been completed. With diversified financing options secured, they are executing optimized project financing to respond to future financial market uncertainties while minimizing costs.

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