S-Oil, HD Hyundai, HMM gain on energy supply fears after US strikes on Iran
S-Oil’s Shaheen project construction site in Ulsan, a future petrochemical complex in the southeastern port city / Courtesy of S-Oil
Stocks related to refining and natural gas, such as S-Oil and HD Hyundai, are expected to benefit from growing concerns over energy supply following U.S. airstrikes on Iran, securities analysts said Monday.
They noted that Korean refiners may see higher margins and inventory valuation gains.
In addition, some speculate that if Iran decides to block the Strait of Hormuz, a surge in maritime freight rates could also create favorable conditions for shipping companies such as HMM.
In response to the U.S. strikes on Iran's nuclear facilities on Saturday (local time), Iran is moving to shut down the Strait of Hormuz, one of the world's most critical oil transit chokepoints.
A closure of the strait would cause major disruptions in the energy market, dealing a direct blow to Asian nations and also leading to significant economic consequences for the U.S. and other countries.
According to iM Securities, about 20 percent of the world's oil supply was shipped through the Strait of Hormuz last year. In the case of liquid natural gas (LNG), the strait also handled around 80 million tons, accounting for 20 percent of the global total of 400 million tons.
Analyst Jeon Yoo-jin noted that with Iran refusing to halt its nuclear activities and seeking retaliation against the U.S., Middle East tensions are unlikely to ease soon. Jeon added that scenarios involving a blockade or disruption of the strait cannot be ruled out, given Iran's limited military options.
“Even if Saudi Arabia and Russia increase output, a blockade of the Strait of Hormuz, which is vital for oil and LNG exports from key producers, would still drive up oil and LNG prices," Jeon said. "This could benefit Korean refiners through higher margins and inventory gains, with both S-Oil and HD Hyundai likely to gain attention."
Oil tankers pass through the Strait of Hormuz in this Dec. 21, 2018 file photo. Reuters-Yonhap
Fears over a potential shutdown of the strait have also driven up HMM and other shipping stocks amid expectations that rising energy prices and longer shipping routes could increase freight rates.
"A blockade could lead to higher oil prices and logistics costs, but both the U.S. and Iran are wary of a full-scale escalation," said Noh Geun-chang, an analyst at Hyundai Motor Securities.
On Monday, HMM shares rose 2.39 percent to close at 23,550 won ($17), while S-Oil rose 1.79 percent to close at 62,600 won. HD Hyundai increased 0.39 percent to close at 129,300 won.
KOSPI dropped 7.37 points, or 0.24 percent, to close at 3,014.47.