[THE INVESTOR] Surging crude oil prices have sent South Korean oil refining companies’ likely profitability tumbling, industry sources said Aug. 24.

The benchmark Singapore complex gross refining margin plunged to the US$3 per barrel range this month, from US$4.80 in July, after hovering at US$9.90 in January, according to the sources.

Singapore is the regional trading hub of the benchmark Dubai crude.

The margin is the difference between the total value of petroleum products coming out of an oil refinery and the cost of crude and related services, including transportation.

The GRM stood at US$3.50 per barrel in the first week of August before dropping to US$3.10 in the second week and inching up to US$3.40 in the third week.

The reading hovers below the break-even point for the domestic oil refining industry. Usually, a South Korean refiner can generate a profit with a refining margin above US$4.50.

Plunging cracking margins are feared to put a damper on third-quarter earnings of South Korean refining companies that had fared better than anticipated.

(theinvestor@heraldcorp.com)