S-Oil shares have surged more than 7% in early trading, driven by a spike in international oil prices and expectations of strong refining margins due to a global supply shortage of petroleum products.
As of 9:48 a.m. on October 2, S-Oil was trading at 159,300 won, up 10,500 won (7.06%) from the previous trading day, according to the Korea Exchange.
The significant rise in international oil prices overnight has boosted investor sentiment. On October 1, Brent crude for December delivery closed at $102.31 per barrel, a 4.37% increase, on the London ICE Futures Exchange. Meanwhile, West Texas Intermediate (WTI) for November delivery rose 2.71% to $92.87 per barrel on the New York Mercantile Exchange.
News of China halting exports of petroleum products has also impacted international oil prices and refinery stocks. Chinese refiners have reportedly suspended exports of gasoline, diesel, and jet fuel to all regions except Hong Kong and Macau until further notice from authorities.
Additionally, reports that the United States may deploy up to 10,000 more troops to the Middle East have heightened geopolitical tensions, contributing to upward pressure on oil prices.
Market analysts are focusing on the potential positive effects of supply disruptions in major oil-producing countries, including China, on domestic refiners. A decrease in petroleum product supply could lead to higher prices for gasoline, diesel, and jet fuel, further improving refining margins.
Domestic refiners, which have a high proportion of petroleum product exports, are expected to benefit from the global supply shortage. Analysts in the securities industry suggest that the combination of supply disruptions from Russia and the Middle East, along with China's export halt, could exert additional upward pressure on refining margins for domestic refiners in the fourth quarter.
Recent forecasts from the securities sector indicate an improvement in S-Oil's performance. On September 29, Samsung Securities issued a 'buy' rating for S-Oil, setting a target price of 210,000 won. They noted that with global gasoline and diesel inventories declining and the winter heating demand season approaching, the supply of petroleum products is likely to tighten. S-Oil's performance has shown improvement, with its consolidated revenue for the second quarter reaching 11.34 trillion won, a 40.9% increase compared to the same period last year. Operating profit turned positive at 965 billion won, recovering from an operating loss during the same period last year.
By business segment, the refining division recorded an operating profit of 532.4 billion won, while the lubricants division generated an operating profit of 477.4 billion won. The tightening supply of lubricating base oils due to production disruptions and logistical constraints in the Middle East has contributed to the improvement in performance.
* This article has been translated by AI.
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