SK Innovation expects refining margins to rebound on diesel demand

SEOUL (Reuters) - SK Innovation, owner of South Korea’s top refiner SK Energy, said it sees a rebound in refining margins in 2019 supported by firm diesel demand in the second half of the year.

SK Innovation posted an operating loss of 279 billion won ($250.81 million) in the October-December period, dented by low refining margins, compared with an operating profit of 841 billion won a year earlier, the company said in a statement.

Weak gasoline margins have weighed on overall refining margins, profits of refining a barrel of crude into refined products, dragged down by increased global gasoline volumes. Asian gasoline cracks in Singapore are close to the lowest since 2011.

“Despite concerns about global refinery capacity addition and a global economic slowdown, favorable market conditions are expected in the second half of the year, supported by diesel (demand) ahead of sulfur regulations by the International Marine Organization from 2020,” Lee Myung-young, head of finance division, SK Innovation, said on a call with analysts.

S-Oil, South Korea’s third-biggest refiner, said on Monday refining margins were expected to improve, helped by rising diesel demand growth in the second half of the year ahead of the implementation of tougher sulfur cap for marine fuel from 2020.

Kim Ji-yong, head of corporate planning office at SK Energy, said gasoline margins are seen to recover in 2019 as Chinese export volumes are expected to be reduced on lower import quotas than last year.

For 2019, China issued its first batch of crude oil import quotas at 89.84 million tonnes, lower than for the same batch last year, reflecting slowing crude demand growth for the first half of 2019 in China, according to the documents and Reuters data.

Shares of SK Innovation ended 1.6 percent firmer after the earnings announcement, while the KOSPI index edged down 0.06 percent.

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