Korean refinery stocks surged this month as US-Iran military tensions drove Brent crude above $100 per barrel on the 23rd (local time), while airline stocks declined sharply. S-Oil rose 42.11% this month and closed 0.93% higher at 151,200 won on the 24th, as KOSPI fell 5.72%. The divergence stems from rising refining margins, which reached $40 per barrel this month, versus increased fuel costs pressuring airlines. Attacks on Saudi tankers near the Bab-el-Mandeb Strait by Yemen's Houthi forces intensified Middle East crude supply concerns.
S-Oil and GS Lead Refinery Stock Rally With 40% Monthly Gains
S-Oil gained 42.11% this month, while GS rose 43.74% and SK Innovation climbed 37.09%, according to Korea Exchange data on the 25th. The rally followed Brent crude futures for September delivery breaking the $100-per-barrel threshold on the 23rd (local time) at Europe's ICE Futures Exchange, the first breach since May 22 when prices hit $103.54.
Refining margins expanded as US-Iran confrontations over Strait of Hormuz control escalated. BNK Investment & Securities reported month-to-date (MTD) refining margins rose to $40 per barrel this month, peaking at $48 per barrel on the 17th. These figures exceed last month's spot refining margin of $29 per barrel and the long-term average of $10 per barrel.
Kim Hyun-tae, researcher at BNK Investment & Securities, stated: "Refining margins are expanding rapidly as prices for diesel and kerosene products are rising more steeply than crude oil gains. If there are no major disruptions to raw material supply, refinery earnings will maintain higher-than-expected levels in Q3."
Korean Air and Regional Carriers Drop on Fuel Cost Pressure
Airline stocks declined this month as rising oil prices increased fuel costs, which account for approximately 30% of total airline operating expenses. Korean Air fell 7.62% this month, while Trinity Air dropped 22.64%, Jin Air declined 9.88%, Jeju Air lost 8.91%, and Asiana Airlines decreased 6.8%.
Analysts Project Oil Could Reach $160 Per Barrel in Q3
Wi Jae-hyun, senior researcher at Kyobo Securities, stated: "Supply-demand buffers that previously stabilized oil prices have already weakened considerably. If geopolitical risks do not subside, international oil prices face the risk of rising to a maximum of $160 per barrel during Q3."
Wi added: "We must consider that the global energy market is more vulnerable now than during the March Strait of Hormuz blockade. At current price levels, price volatility may react more sensitively to upward movements than downward ones."
FAQ
What drove Korean refinery stocks to surge 40% this month?
S-Oil, GS, and SK Innovation rose 42.11%, 43.74%, and 37.09% respectively this month as Brent crude exceeded $100 per barrel on the 23rd (local time) and refining margins expanded to $40 per barrel, up from $29 per barrel last month.
Why did airline stocks decline while refinery stocks rallied?
Airline stocks fell as rising oil prices increased fuel costs, which represent approximately 30% of total airline operating expenses. Korean Air dropped 7.62% this month, while Trinity Air, Jin Air, Jeju Air, and Asiana Airlines also posted losses ranging from 6.8% to 22.64%.
