South Korean Refiners’ Shares Fall as Global Oil Prices Drop 7%
Key Facts
Oil prices fell at settlement on November 2 amid what appeared to be progress in diplomatic efforts to end the war between the United States and Iran, and shares of South Korean refiners fell in early trading the following day. Brent was at $104.77 a barrel in EL7’s daily closing data, versus $113.43 on October 30. U.S. crude closed at $96.46, down from $104.12 on October 30. JKN reported that S-OIL shares lost 13% in early trading on November 3, while SK Innovation and GS shares fell within a range of 8%. The moves reflect pressure on refinery shares as crude fell, while the rapid decline raised concerns about the value of oil inventories held by the companies.
The Associated Press linked the decline in crude to renewed diplomatic efforts that appeared to be making progress, at a time when concerns about supply disruptions had driven prices higher. Iran said it had a two-day plan to reopen the Strait of Hormuz and resume nuclear talks with the United States, provided Washington met its demands. That puts the prospect of oil flows returning through the strait at the heart of market bets on easing supply risks. The agency reported that Qatari mediators held two rounds of talks with Iranian officials the previous week, and that further talks were planned during the week. Officials said the efforts aimed to advance a framework to halt attacks in the Strait of Hormuz in exchange for the lifting of the U.S. blockade on Iranian ports. They did not describe these developments as the confirmed start of direct negotiations between Washington and Tehran.
Refiners face a dual effect from falling oil prices: cheaper crude lowers their input costs, but it may also reduce the value of oil and products they bought and held before prices fell. JKN reported that the rapid decline could lower the value of crude and oil products held by refineries, raising concerns about inventory valuation losses. The agency presented this as an explanation for investor concerns and share price moves, not as an announcement of losses already incurred. According to its report, S-OIL shares fell 13% in early trading on November 3, while SK Innovation and GS shares moved lower within a range of 8%. These figures remain tied to early trading as reported and do not represent final closing prices. Inventory pressure comes as Brent and West Texas Intermediate prices fell sharply between the October 30 close and the November 2 settlement.
Against this market backdrop, South Korea’s manufacturing purchasing managers’ index showed activity slowing in October while remaining in expansion territory. The index, published by S&P Global, was 51.3 in October, compared with 53.9 in September, its lowest reading since February. The index remained above the 50 threshold separating activity growth from contraction for the 11th consecutive month. S&P Global economist Usamah Bhatti said the data showed a sharp slowdown in growth in output and new orders. Reuters quoted companies as saying that weak demand, shortages of raw materials and rising costs weighed on performance, while output growth was at its weakest pace of the year through the report’s release. Manufacturing indicators thus added a slowing economic backdrop to market moves, without implying that the sector had entered contraction.
The broader picture of the Korean economy was stronger than the factory index signal alone: the economy grew 1.0% in the third quarter, beating market expectations. Reuters attributed the growth to a global boom in artificial intelligence chips that boosted exports and investment. The contrast between accelerating quarterly growth and slowing output and new orders indicators in October highlights differences in the performance of economic components across the two periods. Refinery shares moved in early trading on November 3 following the previous session’s oil decline. Iran had said on November 2 that its plan to reopen the Strait of Hormuz and resume nuclear talks would take two days if Washington met its demands. Qatari mediators also planned to hold further talks during that week, according to officials cited by the Associated Press.