S-Oil Poised to Crush Q3 Profit Forecasts Amid Diesel Margin Surge

S-Oil, one of South Korea's leading refiners, is expected to post an impressive third-quarter operating profit of over 1 trillion won ($962.81 million), according to securities analysts on Sept. 7.

This projection represents a significant increase of 34.1% from the previous quarter and far exceeds market consensus of 1.06 trillion won. The refining division alone is estimated to contribute 851.8 billion won, surging 60% from the previous quarter.

The key driver behind S-Oil's strong performance is a global shortage of refined products. U.S. diesel margins have reached an all-time high of $108 per barrel as of Sept. 2, due to disruptions to global refining capacity caused by geopolitical risks.

S-Oil's largest shareholder, Saudi Aramco, has set the official selling price (OSP) for crude oil destined for Asia at negative $2.0 per barrel for three consecutive months. This unusual move is seen as a sign that Middle Eastern oil producers are keeping prices low to defend market share.

Analysts believe that S-Oil's strong earnings visibility and improved cash flow will lead to stronger shareholder return policies from next year, with some even raising their target price for the company to 210,000 won.