WRAPUP 1-S.Korea Sept crude runs up; margins remain weak
SEOUL, Sept 9 (Reuters) - South Korea's overall crude processing rates edged up in September as a crude unit taken offline in August for maintenance restarted, but weak margins capped rises, a Reuters survey showed on Tuesday.
South Korea's four refiners -- SK Energy (096770.KS), GS Caltex, S-Oil Corp (010950.KS) and Hyundai Oilbank -- have been processing 2.23 million barrels of crude per day (bpd) on average this month, up from 2.16 million bpd in August.
But the 3.2 percent increase was entirely due to GS Caltex, South Korea's second-biggest refiner, which raised crude runs to 630,000 bpd-650,000 bpd from 530,000 bpd after restarting its 130,000 bpd crude distillation unit (CDU) in September. The others either cut or maintained runs.
"There is just so much supply (of products) in the market," said a source from Hyundai Oilbank, the country's smallest refiner.
Complex margins in the Singapore refining hub were at $4.98 a barrel on average, up from $4.06 in August, but more than halved from April, Reuters data showed. <REF/MARGIN1>
Lighter oil products -- gasoline, diesel, jet fuel -- that are measured by the complex margins had delivered profits for the South Korean refiners when fuel oil cracks, measured by simple margins, were suffering from hefty discounts.
But the simple margins -- measuring the profit of fuel produced from the first round of crude distillation -- recovered to $2.62 a barrel from $1.07 in August, and a discount of 92 cents in July as depressed residual fuel oil prices strengthened relative to crude.
SK Energy and Hyundai Oilbank had already cut refinery runs earlier in August, weighed down by the lack of demand from China, the world's second-largest energy consumer, after the Olympics.
EXTERNAL PRESSURE
Adding to pressure on margins, South Korean refiners that buy crude in dollars and sell fuel domestically have been suffering from the falling South Korean won KRW=, which hit its weakest in over 4 years against the dollar last week.
But the recent plunge would not significantly dull their appetite for crude, refinery sources said, noting they maintained operations through the financial crisis of the late 1990s.
Contrary to market expectation, the country's top refiner SK Energy said it will maintain crude runs at an average of 750,000 bpd for the rest of the year, refraining from another cut. [ID:nSEO0162105]
SK Energy had operated 810,000 bpd on average in the first seven months of the year, about 7.5 percent higher than the current rate, according to data from Korea National Oil Corp (KNOC).
"SK Energy had to make a cut to 750,000 bpd, which is sort of the bottom line," said one refinery source.
The South Korean currency fell as low as 1,158.7 last week, the weakest in over four years.
The table below shows September crude run rates and maximum capacity of the four Korean refiners, in thousands of barrels per day (bpd):
Sept'08 Aug'08 Max capacity ------------------------------------------------------- SK Energy 750 750-800 1,115 GS Caltex 630-650 530 680 S-Oil 530 530 580 Hyundai Oilbank 300-310 310-340 390 ------------------------------------------------------ Total 2,210-2,240 2,120-2,200 2,765 ------------------------------------------------------ (Reporting by Angela Moon; Editing by Keiron Henderson)
