S-Oil Equipped with Refining Facilities Gets Target Price Raised on Surging Oil Prices [Click e-Stock]

Shinhan Investment & Securities Raises Target Price
from 200,000 Won to 220,000 Won

On September 17, Shinhan Investment & Securities maintained its "Buy" investment opinion on S-Oil and raised the target price from 200,000 won to 220,000 won.

Jinmyung Lee, a researcher at Shinhan Investment & Securities, explained, "Geopolitical shocks increase the value of conversion capability, and refining facilities are irreplaceable," expressing this view.

Researcher Lee predicted that S-Oil, which owns refining facilities, is expected to benefit as oil prices are surging again. The Saudi Arabian Arab Light official selling price (OSP) has fallen from $19.5 in May to -$2 recently, marking the lowest level since June 2020. Although there is high price and volume visibility due to the contract volumes with Aramco, disruptions to bypass routes are a factor delaying introduction; therefore, he explained that the benefits from OSP and middle distillate strength remain valid.

He further emphasized that the strong market environment continues due to low inventories. As of the end of August, U.S. middle distillate inventories hit an all-time low, and the Organization for Economic Cooperation and Development (OECD) commercial inventories are also at their lowest point since April 2014. Since Aramco mentioned that it could take up to 18 months to rebuild inventories, Lee forecast that even if refining facilities are restored, initial increased production would be absorbed into inventory replenishment first, so margin normalization would lag behind supply recovery.

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