S-Oil, South Korea’s third-largest oil refiner, said Thursday it swung to profit in the fourth quarter of 2015 thanks to high refining margins prompted by heightened demand for oil products.

The firm posted an operating profit of 17 billion won ($14 million) in the October-December period last year, up by 5.6 percent from the previous quarter, and swung to profit from an operating loss of 240 billion won posted during the fourth quarter of 2014.
 

“The operating income saw a small increase from the third quarter,” said S-Oil during a conference call. “Refining margins were very strong, but the decline in crude prices canceled out much of the higher income.”

Though plunging oil prices led S-Oil to record inventory valuation losses of some 250 billion won, the refiner said it retained its profitability in the fourth quarter thanks to an improvement in the Singapore refining margin ($3.90 per barrel in Q3 to $6.40 per barrel in Q4).

“In the fourth quarter, refining margins surged along with increase in spreads of all petroleum products on the back of strong demand in Asia amid further declines in crude prices,” S-Oil said.

Hit by low crude prices, its refining business logged an operating loss of 137.9 billion won. Yet, its petrochemicals and lube oil business together recorded 155 billion won in operating profit, according to S-Oil.

S-Oil’s fourth quarter sales stood at 3.95 trillion won, while net profit stood at 80.6 billion won, a significant improvement from a net loss of 272 billion won during the same period in 2014.

Meanwhile, S-Oil logged a net profit of 676 billion won in 2015, compared with a loss of 287 billion won of 2014. Sales dropped 37.4 percent on-year to 17.89 trillion won, though its operating income reached a four-year high at 878 billion won.

Projecting a positive outlook for 2016, S-Oil said “refining margins will remain healthy on the back of tight supply-demand balance as the global oil demand growth will continuously outpace the incremental supply. Asia refiners will benefit the most.”

By Sohn Ji-young (jys@heraldcorp.com)