Refiners may report stronger-than-expected Q3 earnings on improving margins

South Korean refiners may report stronger-than-expected earnings for the third quarter as their refining margins are forecast to have rebounded sharply in August, industry sources said Tuesday.

The benchmark Singapore complex gross refining margin hovered above $7 per barrel this month, sharply up from $3.9 in August, 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 from oil refineries, and the cost of crude and related services, including transportation.

The August reading of below $4 per barrel falls short of the break-even point for the domestic oil refining industry. Usually, a South Korean refiner can generate a profit with a refining margin of more than $4.50.

Rebounding cracking margins are expected to help local refiners log better-than-expected third-quarter earnings. A recent improvement in the refining margin came from a decline in oil stockpiles in the US, and in the operations of Chinese and US refiners.

"Should the refining margin maintain its current level, oil refiners will likely see their earnings increase down the road," said Son Young-joo, an analyst at Kyobo Securities.

International oil prices have been rising in recent months, with three major benchmark products trading in the upper $40 per barrel range.

The country's four major oil refiners -- SK Innovation, GS Caltex, S-Oil and Hyundai Oilbank -- racked up decent profits in the first half, bolstered by their better-than-expected sales and relatively high cracking margins. (Yonhap)