S-Oil swings to profit as oil prices surge

May 11, 2026, 11:55 am

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A view of an S-Oil refinery complex. /S-Oil

S-Oil returned to profitability in the first quarter as soaring crude oil prices and supply concerns linked to the Middle East conflict and risks surrounding the Strait of Hormuz boosted refining margins.

The company said Sunday it posted consolidated revenue of 8.94 trillion won ($6.4 billion), operating profit of 1.23 trillion won and net profit of 721 billion won for the January-March period.

Operating profit more than tripled from the previous quarter’s 371.9 billion won. S-Oil had recorded an operating loss of 21.5 billion won in the same period last year.

The earnings rebound was largely driven by inventory-related gains resulting from rising global oil prices. The company reported inventory gains of 643.4 billion won during the quarter, accounting for more than half of total operating profit. March alone contributed 599.5 billion won in inventory gains.

Refiners typically purchase crude oil in advance and sell refined products later. When oil prices rise sharply, refiners benefit by selling products made from lower-cost inventory at higher market prices. Conversely, falling oil prices can result in inventory valuation losses.

During the first quarter, crude oil prices surged due to the Middle East conflict and concerns over possible disruptions in the Strait of Hormuz. Reduced refinery operations in parts of the region and export restrictions by some countries further tightened supply, improving refining margins across Asia, particularly for gasoline and diesel products.

The refining division led the company’s earnings performance, posting revenue of 7.1 trillion won and operating profit of 1.04 trillion won.

The petrochemical division recorded revenue of 1.1 trillion won and operating profit of 25.5 billion won, returning to a slight profit. Improved aromatics market conditions driven by higher operating rates at downstream Chinese facilities supported performance, though rising feedstock costs since March weakened spreads. Olefin products also faced cost pressure, while propylene oxide maintained relatively solid profitability.

The lubricant base oil business posted revenue of 737 billion won and operating profit of 166.6 billion won, although profitability declined from the previous quarter as product prices failed to keep pace with rising raw material costs.

Market analysts expect refining margins to remain firm in the second quarter if geopolitical risks in the Middle East continue. However, they also warned that if oil prices stabilize or decline, the inventory and lagging effects that boosted first-quarter results could reverse and weigh on earnings.

S-Oil said it has maintained a stable crude oil supply system despite ongoing supply concerns. The company cited long-term crude purchase agreements with parent company Saudi Aramco and transportation contracts with Saudi shipping firm Bahri as key factors ensuring stable supply.

The company said crude imports, which temporarily declined due to scheduled maintenance, are expected to return to normal levels from May and June.

S-Oil also said its large-scale petrochemical Shaheen Project has entered the final stage of construction. As of the end of April, engineering, procurement and construction progress had reached 96.9 percent, with the company targeting mechanical completion by the end of June and commercial operation preparation by the end of the year following trial runs.

#S-Oil #Saudi Aramco #oil prices #refining margin #Hormuz Strait