South Korea refiner S-Oil saw profit from its base oils and lube unit rebound to a two-year high in the fourth quarter, as Group III base oils prices rose while feedstock costs fell.

The unit generated operating profit of 207 billion South Korean won ($145 million) in the three months to end-December, up 83% year on year and the strongest performance since end-2023.

Key Highlights

·         Profit rose despite weak sales, with revenue falling for the fourth time in five quarters.

·         Base oils output rose, with operating rates running at maximum levels for the first time since late 2021.

·         The divergence between sales and profit reflected a sustained recovery in Group III base oils prices, especially in Europe, from the start of the second quarter of last year.

·         Europe Group III prices rose at end-2025 to the highest in more than a year, while fourth-quarter crude oil prices slipped to a multi-year low.  

·         The Group III price-premium over crude oil rebounded, climbing to the highest since end-2023.

·         The price-premium widened further in January, supporting firm margins in early 2026.

·         The base oil unit’s operating profit margin rose to 27% in the fourth quarter, up from less than 20% throughout the previous year and the highest since the first half of 2023.

·         Base oils accounted for 9% of S-Oil’s total sales, the highest share since the first half of 2024.

·         The unit remained a key earnings driver, contributing 49% of S-Oil’s operating profit.