FSSIA Picks ESSO and BCP for Best Refinery Stocks on Strong GRM Outlook

The Dubai Crack Singapore Refining Margin gains more than 230% this year, rising from $6 to more than $20 per barrel as of this week while making a record high at $26.60 in March. Corporates running refining business are surging from widening margin that supposedly leads to higher net profit at the end of the quarter. 

Not all of the three refinery arms of PTT recorded higher net profit in the first quarter of 2022. PTTGC reported a net profit of THB 4,211 million (-56% YoY), IRPC reported net profit of THB 1,501 million (-32% YoY) while TOP reported a net profit of THB 7,182 million (+113% YoY). 

Even with all those profits, these three energy giants faced the same problem; hedging losses. PTTGC had the highest hedging loss among all three companies at USD16.6/bbl. Meanwhile, TOP recorded a loss of USD8.2/bbl and IRPC at USD5.8/bbl. 


As the momentum of global refinery supply is projected to remain tight throughout 2022-24, FSS International Investment Advisory (FSSIA) indicated that hedging losses and solid non-refinery earnings will be two key factors that will greatly differentiate the earnings of one refinery from another.

In addition, with no hedging losses, stronger earnings from oil stations, and significant room for refinery utilisation rate increases, FSSIA chose ESSO and BCP as its top picks among refinery companies. ESSO is the top pick given its strong GRM outlook and high yields for gasoline (28-30%), diesel and jet (>50%), and rising earnings from its oil stations on higher marketing margins, sales volumes, and a refinery utilisation rate of over 80%. FSSIA stated that it also likes BCP for its strong GRM outlook, higher utilisation rate, and the potential earnings growth from its oil stations on rising sales volumes and improving marketing margins.