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Refining Stocks Rally on Strong Margins Despite Geopolitical Tensions

Energy Minerals · Oil Refining/Marketing · yonhap_finance · 2026-08-29

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Refining stocks like S-Oil and GS have outperformed the KOSPI as slow product supply recovery boosts refining margins despite crude supply challenges.

What Happened

Refining Sector Rally: Major refining stocks, including S-Oil, GS, and SK Innovation, have recorded significant gains this month, outperforming the KOSPI. This rally is driven by improved crude procurement conditions and a decline in input costs.

Rising Refining Margins: While crude logistics remain unstable due to the Middle East conflict, supply via alternative routes is gradually recovering. Conversely, the recovery of refined product supply is lagging significantly behind crude due to delayed facility repairs and low inventory levels.

Cost Competitiveness: Reductions in Saudi Arabia's Official Selling Price (OSP) have eased cost burdens for refiners. With product prices declining more slowly than crude oil prices, refining margins—a key profitability indicator—are remaining at elevated levels.

Future Outlook: Analysts expect refining margins to remain strong for the time being, as normalizing refining operations and rebuilding inventories will take time even if the conflict ends. The key for the refining sector will be the duration of the spread between product and crude oil prices rather than crude prices themselves.

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