South Korean oil refiner S-Oil Corp. on Monday announced robust financial results for the third quarter of 2023, surprising market watchers. The company reported an operating profit of 858.9 billion won ($637.1 million), which is a 67 percent increase compared to a year ago and a staggering 2,258 percent surge from the previous quarter.

S-OIL said its third-quarter sales totaled 8.99 trillion won, while operating profits soared to 858.9 billion won. Although sales dropped by 19 percent compared to the previous year, operating profits demonstrated remarkable growth with a 67.9 percent increase. This strong performance was attributed to various sectors within the company.

In the refining sector, S-OIL hit sales of 7.19 trillion won and an operating profit of 666.2 billion won, with a profit margin of 9.3 percent. The petrochemical sector contributed 1.12 trillion won in sales and 45.4 billion won in operating profits respectively, reflecting a 4 percent profit margin. The lubricant sector saw sales totaling 676.1 billion won and operating profits of 147.2 billion won, with a profit margin of 21.8 percent.

“The strong refining margin in the refining sector, coupled with the increase in international oil prices, resulted in a substantial turnaround in profits related to inventory,” a company official said. Typically, when oil prices rise, oil companies outwardly expand sales and operating profits.

Moreover, demand for gasoline and aviation fuel rebounded significantly in the third quarter of 2023 as travel restrictions due to the Covid-19 pandemic began to ease. This rebound in demand improved the refining margins, or the total profit obtained when refining barrels of crude oil into various petroleum products.

Singapore’s refining margin, which remained stable at an average of $8 per barrel from the third quarter of 2022 until the first quarter of 2023, dropped to $0.9 per barrel in the second quarter. The margin recovered to $7.5 per barrel in the third quarter of 2023, leading to increased sales and operating profits for S-OIL’s petroleum product production.

Despite these positive developments, the petrochemical sector saw a fall in profits due to the slow recovery of front-end industries. Operating profits in the petrochemical sector hit 45.4 billion won, a decrease from the second quarter’s 82 billion won. This decline was attributed to the delayed recovery of the Chinese economy while new petrochemical product facilities started operating overseas, resulting in lower profitability.

The lubricant sector, although experiencing a profit decrease, still achieved an operating profit margin of over 20 percent. S-OIL remains optimistic about the future, saying that profitability is expected to further improve in the fourth quarter with supply being relatively low compared to demand.

By Song Min-geun and Minu Kim

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