SEOUL: S-Oil Corp, South Korea's third-biggest refiner by capacity, said on Monday that refining margins are expected to improve in 2019, boosted by growing diesel demand.
The refiner, whose main shareholder is Saudi Aramco, said in an earnings statement that global supply increase is limited as new crude distillation units (CDUs) are expected to come online in the fourth quarter of the year.
"The margin will gain notable momentum in the second half through soaring demand for diesel ahead of International Marine Organization's (IMO) 2020, sulfur cap regulation," according to the refiner's earnings statement.
Asia's benchmark Singapore refining margins, or profits of processing a barrel of Dubai crude into refined products, are now at their lowest levels since August 2013, of $1.53 a barrel, dragged down by weak gasoline cracks on excess supplies.
Gasoline cracks have been under pressure of slowing fuel consumption and increasing global gasoline supplies, with Asian gasoline margins in the Singapore sitting around at minus $2 per barrel on Monday, the lowest level since 2011.
Low refining margins weighed on the company's fourth-quarter business. The company posted an operating loss of 292 billion won ($261.37 million) in the fourth quarter ended December, compared with an operating profit of 369 billion won from a year earlier.
Ko Gwang-cheol, head of the company's investor relations department, said on a call with analysts that refining margins were expected to rebound in 2019 as "supply glut will be eased," on the back of limited supply increase.
The refiner, which has 669,000 bpd refining capacity, said it plans to shut down a 250,000 barrel per day (bpd) No.3 crude distillation unit (CDU) and 89,000-bpd condensate fractionation unit (CFU) in 2019 for maintenance.
The refiner's No.3 CDU and CFU maintenance will take place in March for 30 days, Ko said, adding that maintenance for its 73,000-bpd gasoline-making residue fluidized catalytic cracker (RFCC) is scheduled in the second half of the year.
Shares of S-Oil ended 0.4 percent weaker on Monday, while the broader market was 0.02 percent lower.
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