[Edaily Reporter KIM YOON-JEONG ] Korea Investment & Securities forecast that S-OilCorporation(010950)will continue to enjoy high refining margins due to a global shortage of refining capacity. The firm assesses that earnings visibility for the refining sector remains high, given that diesel prices have hit record highs even as U.S. refinery utilization rates have risen to a record high of 98%. The firm maintained its “Buy” rating and raised the target price to 180,000 won.

On the 7th, Lee Jong-jae, an analyst at Korea Investment & Securities, stated, “While crude oil is in short supply, refining capacity is even more scarce.” He went on to point out that even in the U.S.—where there are currently no issues with crude oil supply and demand or refinery operations—the refinery utilization rate reached 98% at the end of August.
U.S. diesel prices have surpassed the all-time high recorded in June 2022. Unlike at that time, when West Texas Intermediate (WTI) crude oil was trading at around $120 per barrel, WTI and Brent crude are currently trading at $90 to $95 per barrel. Murban crude (UAE) has risen to $105 per barrel.
The analyst assessed, “The fact that the WTI price is at an all-time high even at the $90/BBL level indicates that there is a genuine shortage of refining capacity at present.”
He noted that the shortage of refining capacity is unlikely to be resolved in the short term, even if geopolitical risks subside. “Even if the war in Iran were to end immediately, it would likely take at least two to three years for capacity to return to normal,” the analyst stated. He further analyzed that if geopolitical risks in the Middle East are resolved and South Korea’s domestic oil price cap is lifted, domestic refiners would be able to secure additional profits in the domestic market; therefore, concerns about a decline in profits due to the resolution of these risks are minimal.
Whether China resumes crude oil imports is also a key variable. China increased its crude oil imports to a record high in the second half of last year but has been reducing imports since the war began in February of this year. The analyst predicted, “If China begins to increase its crude oil imports starting in September—as the war enters its seventh month—international oil prices are expected to surge even further.”
The target price was raised to 180,000 won by applying a price-to-book ratio (PBR) of 1.4—the average over the past 10 years—to the average estimated book value per share (BPS) for 2026 and 2027. The analyst stated, “Earnings visibility is very high,” adding, “The impact of record-high refining prices on demand remains a variable.”