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South Korean refiners' losses deepen in Q3, margins set to enhance in Q4

South Korean refiners reported on Monday sharp losses in the third quarter from oil refining, however expect their margins to recover in the 4th quarter with peak winter season demand and refinery run cuts in Asia.

SK Development, moms and dad of South Korea's biggest refiner SK Energy, said the July-September quarter operating loss for its refining organization was 616.6 billion won ($ 450.2. million), its biggest loss since the fourth quarter of 2022.

Declining oil costs amid issues over slowing demand in. China and a prospective economic crisis in the U.S. triggered substantial. inventory-related losses, while refining margins were poor in. the 3rd quarter, the company stated.

We were in an unfavourable macro background, which drove down. the petroleum price and the overall product market was. squeezed, Kid Sung-chul, head of business strategic planning. at SK Energy, told experts on a profits call.

We continued to keep a very little run rate for our crude. distillation units (CDUs), so that we can efficiently defend. versus unfavorable topping margins, Kid stated.

The business preserved its typical CDU run rate at 81%. in third quarter from the second quarter, however it is down 1. percentage point from 2023.

S-Oil, the nation's third-largest refiner whose. primary shareholder is Saudi Aramco, reported a. September-quarter operating loss of 415 billion won on Monday,. versus a 859 billion won revenue a year earlier.

Its refining organization reported its largest quarterly loss. because the first quarter of 2020, according to business documents.

Recently, unlisted refiner Hyundai Oilbank swung to a 263. billion won operating loss for the 3rd quarter, versus a 262. billion won revenue a year previously.

Asia's refining margins << DUB-EFS-1M > in between June and August. slumped to the most affordable since the 3rd quarter of 2022, LSEG data. showed, forcing refiners to cut output.

While margins have actually recuperated in current weeks on lower crude. prices, oversupply of fine-tuned products and competition from brand-new. refineries in China and the Middle East weighed on the outlook. for Asian refiners, analysts said.

For the October-December quarter, SK Innovation said it. expects lower oil rates to support refining margins while. seasonal heating need sets in. The business added that economic. potential customers from growth in the U.S. and from China's stimulus. might improve and support oil need.

In the fourth quarter, SK may keep crude throughput at a. similar level as the third-quarter if margins remain weak, however. it plans to increase output if the market recuperates, Child said,. including that it is likewise importing fuel oil to enhance margins.

S-Oil also stated cuts in supply from refineries around the. area would support better margins in the 4th quarter.

(source: Reuters)