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By Anna J. Park
With global oil prices heading towards the $90 per barrel range, a nine-month high, local oil shares are showing bullish moves as well.
According to the Korea Exchange (KRX) on Sunday, the price of S-Oil, one of Korea's top oil refinery businesses, has been on a continual rise since early July. Its stock price has increased by over 25 percent during the past several weeks, after hitting a 52-week low of 62,200 won ($46) on July 7.
SK innovation, another major energy company engaged in petroleum production and refining, has also watched its stock price rise by some 16 percent, despite some fluctuations, since early July. On a similar note, the stock price of GS Holdings Corp., which holds GS Caltex, one of the top oil companies in Korea, as its major subsidiary, has also risen by about 10 percent during the past month and a half.
The oil-related energy firms' performances at the local stock market stand in contrast to the average performance of the main benchmark KOSPI, which increased by only 0.3 percent during the same period.
Market experts say oil refiners are representative beneficiaries of globally rising oil prices, as they benefit from valuation gains on their previously purchased crude oil inventories, leading to an improvement in their profitability, or refining margins.
"The recent upward trend in refining margins has been quite steep," said Chun Yu-jin, an analyst at Hi Investment & Securities. "The upward trend in refining margins is expected to continue for the time being, given decreasing stocks of kerosene and diesel in the U.S. and Europe due to heat waves."
Industries such as shipbuilding and machinery are also expected to benefit from the increasing oil prices. The share prices of Hyundai Heavy Industries, Hanwha Ocean and Hyundai Mipo Dockyard have increased by 31 percent, 14.9 percent and 9.6 percent, respectively, since early July.
"KOSPI index data from 2013 to 2022 showed that a positive correlation exists between energy companies, such as oil refining and machinery and shipbuilding, and global oil prices," Kim Dae-jun, an analyst at Korea Investment & Securities, pointed out.
On Aug. 9, the price of September West Texas Intermediate (WTI) crude oil on the New York Mercantile Exchange (NYMEX) reached $84.48 per barrel, and Brent crude oil reached $87.5 per barrel. This represents an increase of over 10 percent in just a month. Local oil prices were also affected by the global oil price surge, with the average selling price of gasoline at domestic gas stations exceeding 1,700 won per liter for the first time in 10 months.
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