popular articles

The depreciation of the won worsens South Korean refiners’ losses amidst political turmoil

The decline of the won against the dollar exposes South Korean refiners to significant losses on crude import costs, while the political crisis surrounding martial law undermines investor confidence.

Please share:

The recent depreciation of the South Korean won against the dollar, reaching a multi-year low, is putting pressure on South Korean refiners as settlement costs for imported crude soar. This currency movement arises amid internal political unrest, exacerbating the fragility of the country’s financial markets.

Financial and logistical impacts

South Korea’s four main refiners – SK Innovation, GS Caltex, S-Oil, and Hyundai Oilbank – depend almost entirely on imports for their crude oil needs, making the dollar-won exchange rate a critical factor. According to industry sources, every 10-won increase in the exchange rate results in foreign exchange-related losses of $5 million to $10 million for these companies.

Currently, refiners are receiving shipments of medium-sour Middle Eastern crude that were negotiated months ago, at a time when exchange rates were more favorable. However, the sudden depreciation of the won has significantly inflated final bills. Teams specializing in oil derivatives and currency hedging are struggling to mitigate these unforeseen impacts.

The dollar-won exchange rate climbed to 1,436.26 won during the afternoon session on December 16, according to the Bank of Korea, compared to 1,403.96 won at the beginning of the month. This volatility increases pressure on refining margins, which are already strained by average import costs of $83.96 per barrel over the first ten months of the year, according to Korea National Oil Corp.

Political turmoil

The ongoing political crisis, marked by the declaration of martial law on December 3 and President Yoon Suk-yeol’s resistance to judicial investigation, has shaken investor confidence. Although Yoon’s impeachment was passed by the National Assembly on December 14, slow judicial processes and partial arrests of military and government officials prolong political instability.

Millions of South Korean citizens are demonstrating daily to demand the arrest of the president and his allies. While these protests remain largely peaceful, the perception of political risk undermines the stability of financial markets.

Outlook for the energy sector

Despite the tense political climate, the fundamentals of South Korea’s refining and oil trading industries remain robust. Refiners continue to meet the demands of their clients in Asia and Oceania while fulfilling supply contracts for petroleum products. However, refining margins remain under pressure due to currency volatility and political uncertainty.

Industry professionals hope for a swift resolution to the crisis and the establishment of a new governmental leadership structure. This transition is considered essential for restoring investor confidence and stabilizing South Korea’s financial markets, which are deeply interconnected with global supply chains.

Register free of charge for uninterrupted access.

Publicite

Recently published in

The United States has cancelled oil operation authorisations in Venezuela for foreign companies, disrupting exports and reinforcing the country's economic isolation following Nicolás Maduro's contested re-election.
The Algerian energy group Sonelgaz is offering its technical expertise to Burkina Faso to strengthen its electrical infrastructure, illustrating Algeria's strategic intention to consolidate its presence in sub-Saharan Africa’s energy markets.
The Algerian energy group Sonelgaz is offering its technical expertise to Burkina Faso to strengthen its electrical infrastructure, illustrating Algeria's strategic intention to consolidate its presence in sub-Saharan Africa’s energy markets.
Washington again delays the enforcement of sanctions against NIS, the Serbian energy company controlled by Gazprom, extending the status quo until the end of April according to Serbian President Aleksandar Vucic.
Washington again delays the enforcement of sanctions against NIS, the Serbian energy company controlled by Gazprom, extending the status quo until the end of April according to Serbian President Aleksandar Vucic.
The United States has strengthened its support for Guyana amid Venezuela’s claims over the Essequibo, warning Caracas of a military response in case of aggression targeting the territory or American oil interests.
The United States has strengthened its support for Guyana amid Venezuela’s claims over the Essequibo, warning Caracas of a military response in case of aggression targeting the territory or American oil interests.
No attacks on energy installations have been reported since a partial agreement announced by the United States, marking a pause in hostilities targeting critical infrastructure.
During a visit to Guyana, U.S. Secretary of State Marco Rubio announced that any Venezuelan attack on the territory or oil infrastructure of Guyana would trigger a military response, heightening regional tensions.
During a visit to Guyana, U.S. Secretary of State Marco Rubio announced that any Venezuelan attack on the territory or oil infrastructure of Guyana would trigger a military response, heightening regional tensions.
US Secretary of State Marco Rubio launches meetings with Caribbean leaders to discuss energy security, trade pressures and regional instability, including in Haiti and Guyana.
US Secretary of State Marco Rubio launches meetings with Caribbean leaders to discuss energy security, trade pressures and regional instability, including in Haiti and Guyana.
Hungary’s Foreign Minister travelled to Moscow for talks with Russian authorities on energy security, reinforcing a strategic energy partnership already bolstered by record gas and oil deliveries in 2024.
Hungary’s Foreign Minister travelled to Moscow for talks with Russian authorities on energy security, reinforcing a strategic energy partnership already bolstered by record gas and oil deliveries in 2024.
Donald Trump imposes 25% tariffs against importers of Venezuelan oil, particularly targeting China, which has already condemned an infringement on its economic sovereignty, signaling increased tensions in global energy markets.
The planned visit of senior US officials to Greenland sparks political backlash in Nuuk, as no new government has been formed since the 11 March elections.
The planned visit of senior US officials to Greenland sparks political backlash in Nuuk, as no new government has been formed since the 11 March elections.
Starting 2 April, the United States will apply a 25% customs duty on all goods from countries trading with Venezuela’s oil or gas sector, Donald Trump announced.
Starting 2 April, the United States will apply a 25% customs duty on all goods from countries trading with Venezuela’s oil or gas sector, Donald Trump announced.
Washington imposes sanctions on Luqing Petrochemical, the first independent Chinese refinery targeted for its alleged ties to Iranian oil, as part of its intensified economic pressure campaign against Tehran.
Washington imposes sanctions on Luqing Petrochemical, the first independent Chinese refinery targeted for its alleged ties to Iranian oil, as part of its intensified economic pressure campaign against Tehran.
A Panama-flagged vessel suspected of belonging to the Russian shadow fleet was detained by German customs after suffering an engine failure in the Baltic Sea in January.
Amidst war and geopolitical uncertainty, Ukraine must choose between European influence and the strategic promises of the United States, a choice that could redefine its economic and security future, particularly in terms of natural resources.
Amidst war and geopolitical uncertainty, Ukraine must choose between European influence and the strategic promises of the United States, a choice that could redefine its economic and security future, particularly in terms of natural resources.
As Russian gas deliveries via Nord Stream have ceased, Europe is exploring possible solutions to repurpose or replace this major infrastructure within a complex energy transition and diversification of supply sources.
As Russian gas deliveries via Nord Stream have ceased, Europe is exploring possible solutions to repurpose or replace this major infrastructure within a complex energy transition and diversification of supply sources.
Donald Trump and Vladimir Putin are set to discuss the sharing of rare earth resources in Ukraine on Tuesday, including energy production plants and territories rich in raw materials. These resources are at the heart of the ceasefire negotiations.
Donald Trump and Vladimir Putin are set to discuss the sharing of rare earth resources in Ukraine on Tuesday, including energy production plants and territories rich in raw materials. These resources are at the heart of the ceasefire negotiations.
UK Energy Minister Ed Miliband met Chinese officials in Beijing to discuss energy cooperation and reducing greenhouse gas emissions, despite disagreements over Hong Kong, forced labour, and the war in Ukraine.
The European Union has announced a €4.7 billion investment to support South Africa’s energy transition. This initiative is part of a broader strategy of economic cooperation and strategic repositioning of international partners.
The European Union has announced a €4.7 billion investment to support South Africa’s energy transition. This initiative is part of a broader strategy of economic cooperation and strategic repositioning of international partners.
American and Vietnamese companies have signed several commercial agreements totaling $4.15 billion, primarily in the energy and aviation sectors, aiming to reduce the trade imbalance between the two countries.
American and Vietnamese companies have signed several commercial agreements totaling $4.15 billion, primarily in the energy and aviation sectors, aiming to reduce the trade imbalance between the two countries.
Presidents Vladimir Putin and Nicolás Maduro announced an agreement to expand their cooperation, particularly in the energy sector. This initiative comes amid increased U.S. sanctions against Caracas.
Presidents Vladimir Putin and Nicolás Maduro announced an agreement to expand their cooperation, particularly in the energy sector. This initiative comes amid increased U.S. sanctions against Caracas.
Guyana’s President, Mohamed Irfaan Ali, reaffirmed his commitment to a diplomatic resolution of the territorial dispute with Venezuela over the Essequibo region as tensions escalate over offshore oil resources.
Donald Trump applies his negotiation methods to the energy sector, leveraging tariffs and targeted statements to influence markets and trading partners. Behind these decisions lies an ambiguous commercial strategy blending bluff and concrete actions.
Donald Trump applies his negotiation methods to the energy sector, leveraging tariffs and targeted statements to influence markets and trading partners. Behind these decisions lies an ambiguous commercial strategy blending bluff and concrete actions.
Newcleo and Danieli have signed a strategic agreement to integrate advanced nuclear reactors into steel production processes, aiming to eliminate fossil fuel use amid rising energy costs in Europe's industrial sectors.
Newcleo and Danieli have signed a strategic agreement to integrate advanced nuclear reactors into steel production processes, aiming to eliminate fossil fuel use amid rising energy costs in Europe's industrial sectors.
The U.S. Secretary of Energy has announced a strategic shift towards fossil fuels, abandoning several climate-related policies from the previous administration, creating uncertainty among energy professionals about long-term market stability.
The U.S. Secretary of Energy has announced a strategic shift towards fossil fuels, abandoning several climate-related policies from the previous administration, creating uncertainty among energy professionals about long-term market stability.

Advertising