South Korea’s four major refineries are expected to report a surge in their operating profit in the third quarter thanks to improved refining margins amid a supply shortage after Hurricane Harvey battered Texas where 30 percent of U.S. refining facilities are based.

According to multiple sources from the refining and brokerage industries, combined operating income of four major refiners - SK Innovation Co., S-Oil Corp., GS Caltex Corp., and Hyundai Oilbank Co. - is projected to top 2 trillion won ($1.76 billion) in the third quarter after it skid to the 900 billion range in the previous quarter.

KB Securities Co. on Wednesday forecast that combined operating income of three refiners - SK Innovation, S-Oil, and GS Caltex - would reach 2.1 trillion won in the July-September period, exceeding market expectations. Hyundai Oilbank is also projected to raise about 350 billion won in operating profit for the cited period, allowing the four refiners to raise almost 2.5 trillion won in combined operating profit, which is a significant jump from 978 billion won raised in the second quarter.

The four refiners’ total operating income in the April-June period had plunged to 978 billion won from 2.8 trillion won a year ago due to falling international oil prices and refining margins.

But their operating income soon recovered to the 2 trillion won range thanks to Hurricane Harvey that hit Texas in the United States in August. About 30 percent of refining facilities in the U.S. are clustered around Texas and major global refiners such as ExxonMobil Corp. and Saudi Arabian Oil Company (Aramco) have suffered from a supply shortage after the region was battered by Harvey.

On top of the overall tightened supply, refining margins have significantly improved so Korea’s four refiners are expected to more than recoup the losses in the third quarter, according to market analysts. Refining margin, which is the difference between the crude oil price and the refined petroleum product, is a key index that determines refiners’ profit.

An unnamed official from the refining industry said the refining margin last year was $5 per barrel on average but it has rebounded to $8 after Hurricane Harvey swept through Texas. The official expected the refining margin would continue to improve until the end of this year.

Improved business conditions of overall petrochemical industry have also helped the Korea’s top four refiners post better financial results in the third quarter. As of Monday, the price of para-xylene was $837 per ton, up $77 from $760 three months ago, while the price of ethylene has surged from $945 to $1,295 over the same period.

By Lee Jae-cheol

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