S-Oil Earnings Jumped

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South Korean refiner S-Oil reported that its base oil business posted a strong increase in operating income and a drop in sales revenue for the quarter ending June 30, compared to 2019’s second quarter.

S-Oil said that its base oil business posted a second quarter operating profit of 103.3 billion won (U.S. $86 million), up 150 percent from 41.4 billion in 2019’s second quarter. Sales revenue for the quarter dropped 21 percent to 271.3 billion won.

Price spreads in Asia between base oil and high-sulfur fuel oil maintained a healthy level on low feedstock costs during the second quarter, the company stated, averaging $50.60 per barrel during this year’s second quarter compared to $26.30/bbl for the same period of 2019, the Seoul-based refiner noted in an earnings report released this week. Fuels such as high-sulfur fuel oil and diesel are alternative products to base oils. Base oils are almost always higher priced, but they lack the economies of scale that fuels enjoy and incur some additional costs so that refiners may start to shift production away from base oils even when they are priced higher.

S-Oil makes API Group II and Group III base oils at its plant in Onsan, South Korea. The spread that the company cited is an aggregated number that also entails Group I base oils. In its third quarter outlook, the company said it expected the price spreads to be supported by a gradual demand recovery amid stable crude oil prices.

S-Oil reported that its base oil plant had an 80.1 percent usage rate during the second quarter, down from 88.7 percent during 2019 and 92.3 percent during 2018.

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