Korean Refineries Cash in on Middle East Conflict Chaos

The Middle East conflict is causing chaos in global supply chains, but Korean refineries are capitalizing on the crisis. Amidst the turmoil, domestic refineries saw a record improvement in performance with an 'earnings surprise' in Q2 2026. SK Innovation achieved a turnaround to profitability with operating profit exceeding 3 trillion won.

The shortage of lubricating base oils due to war damage to Middle East facilities is the main driver of this success. The Pearl GTL facility in Qatar's Ras Laffan Industrial Complex suffered severe damage, and its suspension of production had handled approximately 30% of global Group 3 lubricating base oil supply.

The 'Pearl GTL' facility's shutdown led to a surge in profitability indicators for lubricating base oils. The spread (profitability indicator) increased 2.5 times from the low $70s per barrel a year earlier to the $180s in Q2 2026.