S-Oil blamed a weaker won and tighter refining margins on its third-quarter net loss, while the same period in 2023 saw brisk business for the South Korean refiner. Income from base oil remained solid during Q3, as lower demand was offset by tight API Group II supply and cheaper feedstock.
The country’s economy is stagnating, with growth just scraping 1.5%, well short short of the government’s target of 2.5%. A weaker won drives up the price of imports, but this is not being offset by cheaper exports as there is less demand globally.
The company saw a net loss of 206.2 billion won (U.S.$150.5 million) in Q3 across all operations, whereas in the same period of 2023 it was in the black by 545.4 billion won, the company revealed in a regulatory filing. In the same period, Sales declined by 1.8% to 8.84 trillion won from 8.99 trillion won.
For the first nine months of 2024, the refiner recorded a net loss of 61.3 billion won from net profit of 788.3 billion won in the same period of 2023.
“What we see here is a double squeeze: rising costs from a weaker won, and falling prices and demand for refined products. Even though sales only dipped a little, these extra pressures on both costs and pricing quickly turned profits into a net loss,” downstream energy market analyst Gyula Toth told Lube Report. “S-Oil imports most of its oil priced in dollars.”
The company believes seasonal demand growth under limited supply conditions will turn round the trend in Q4, Bloomberg reported. The company’s outlook for base oils is that it will remain solid.
However, an economic slowdown throughout the region is possible and Chinese refiners looking to shed products could suppress margins further.
Saudi Aramco has a controlling a 63.4% stake in S-Oil, which is Korea’s third-largest refiner.