Korean refiners in spotlight as Russia's diesel export ban tightens global supply
Cars line up at a Rosneft gas station in Moscow, Russia, July 9. EPA-Yonhap
Korean refiners are drawing growing attention for their expanding role in the global supply chain after Russia halted diesel exports following Ukraine's attacks on its energy infrastructure, industry experts said Tuesday.
Russia, the world's second-largest diesel exporter after the United States, imposed a temporary ban on diesel exports on July 8 after repeated Ukrainian drone attacks disrupted refinery operations and triggered domestic fuel shortages.
The move has further tightened global diesel supplies at a time when refining capacity in the Middle East has yet to fully recover, while concerns are resurfacing over a potential disruption to shipping through the Strait of Hormuz.
Reflecting the tightening supply, U.S. diesel crack spreads widened from just over $60 per barrel in late June to more than $80 per barrel on the day Moscow announced the export ban last week.
Against this backdrop, Korean refiners are seeking to capitalize on stronger overseas demand while maintaining sufficient domestic inventories, closely watching developments in the Middle East, global oil prices and the won-dollar exchange rate.
Korea is the world's fifth-largest refining nation, with a combined refining capacity of about 3.2 million barrels per day.
Local refiners exported a combined 188.01 million barrels of petroleum products during the first five months of this year, with diesel accounting for 40.6 percent of total exports, according to data from the state-run Korea National Oil Corp.
Industry analysts say Korean refiners are among the biggest potential beneficiaries of the supply disruption, as they operate sophisticated export-oriented refineries capable of quickly increasing diesel shipments to Asia and other markets when global supplies tighten.
The improving outlook has also been reflected in the stock market.
On Monday, shares of SK Innovation Co., Korea's largest refiner, jumped 7.09 percent, while S-Oil gained 5.6 percent, sharply outperforming the broader KOSPI's 8.95 percent.
"The sharp decline in Russia's refining capacity, coupled with the diesel export ban, is likely to support refining margins for a while," said Kang Jin-hyeok, an analyst at Shinhan Investment & Securities.