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Biz News Korea(Eng)
Korean oil refiners worry worsening profit from higher crude prices
- Collected
- 2016.05.27
- Distributed
- 2016.05.30
- Source
- Go Direct
According to industry sources on Wednesday, the Singapore Gross Refining Margin (GRM), which measures profitability in oil-refining, dropped to as low as $4.6 a barrel this month.
The GRM reflects the price difference between crude oil and value of processed output such as gasoline and diesel. The higher the GRM, the bigger profit a refiner can yield.
The current GRM level is similar to that in 2014 when oil refiners spent their worst year. Analysts predict the worsened margin from higher crude prices would take toll on the balance sheet of local refiners from the second half of this year.
Oil cracking is the primary source of revenue for refiners, taking up between 30 percent to 60 percent of their operating profit and 70 to 80 percent of revenue.
Hyundai Oilbank, for instance, entirely runs on the business of making processed petroleum out of imported crude.
Korea usually imports oil from the Middle East, where the delivery takes about one month. If oil prices rise on their way, refiners can profit by pushing out inventories made from cheaper oil.
Local refiners will run out of stock they piled up when oil was cheap in the second half.
By Chung Wook
[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]