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South Korea's S-Oil expects stronger U.S. gasoline demand to support margins in Q2


Petroleumworld 04 19 2017

South Korea's S-Oil Corp said on Tuesday it expects stronger gasoline demand for the U.S. summer driving season to support refining margins in the second quarter, and heavy maintenance to keep supply and demand in balance.

Gasoline demand typically rises during the summer driving season, May through August, as many Americans take to the roads for vacations and outdoor activities.

Higher gasoline margins are also expected in the second quarter due to tight global conditions following the shutdown of a gasoline-making unit of Abu Dhabi National Oil Company (ADNOC), a senior S-Oil official said in an earnings call.

Supply and demand will stay balanced in the April-June quarter, while demand in Asia will drop on quarter as the heating season comes to an end, the refiner said in its quarterly earnings statement. Saudi Aramco (IPO-ARMO.SE: Quote ) is the main shareholder of S-Oil.

"If the Chinese government imposes consumption tax on semi-oil products starting from May, we see this will weaken teapot refineries' price competitiveness and lower their operating rates," said Ko Gwang-cheol, head of the company's Investor Relations team.

China's planned tax on light cycle oil -- a blendstock used in gasoil, was expected to weaken diesel demand from Beijing and put pressure on diesel margins.

The teapot refiners maintained their run rates at around 60 percent in the first quarter, said Ko, adding that they were likely to keep the rates at the current level as the government slashed their import quotas.

S-Oil reported a 34.1 percent drop in its first-quarter operating income to 323.9 billion won ($283.99 million), mainly due to foreign exchange losses though refining margins were healthy.

The firm said it operated its crude distillation units with a combined capacity of 669,000 barrels per day in Ulsan, about 380 kilometres (236 miles) southeast of Seoul, at 99.9 percent of capacity in the January-March period, up from 89.2 percent in the previous quarter. ($1 = 1,140.5300 won) hu)

Reporting by Jane Chung; Editing by Subhranshu Sahu from Reuters.

reuters.com 04 18 2017

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