South Korean oil refiners' key profitability measure has been rising sharply this year on a global economic recovery, boding well for their earnings, industry sources said Tuesday.

The benchmark Singapore complex gross refining margin (GRM) stood at $7.5 per barrel for the first week of this month, up sharply from the $1-2 range a year earlier.

Usually, South Korean refiners turn a profit if the refining margin is above at least $4 per barrel.

Hit by a plunge in oil demand due to the coronavirus pandemic, the GRM sank to negative territory in 2020 and ranged from $1 to $2 per barrel until the first half of last year.

But the benchmark figure began to bounce back in the second half of last year thanks to COVID-19 vaccines and a rebound in the world economy, with its growth pace gaining further ground this year.

Refining margins are linked to international oil prices. Higher crude prices mean greater margins, or the difference between the total value of petroleum products and the cost of crude and related services.

On top of the rising GRM, local oil refiners are expected to benefit from surging international crude prices stemming from geopolitical risks, including the Ukraine crisis.

US West Texas Intermediate crude futures for March delivery closed at a seven-year high of $92.31 per barrel Friday, according to data from the Korea National Oil Corp.

It represents the first time since 2015 that prices of WTI have surpassed the $90 mark.

Prices of Dubai crude, South Korea's benchmark, came to $90.22, and Brent prices finished at $93.27.

Expectations are rising that international oil prices may rise to the $100-per-barrel range down the road.

Some analysts voiced concern that the rising refining margin and international crude prices could lead to weaker demand, but most say they will likely bolster local refiners' bottom lines.

Stung by the fallout from the coronavirus pandemic, SK Innovation and three other oil refiners in South Korea registered a combined operating loss of more than 5 trillion won ($4.2 billion) in 2020.

But those companies are estimated to have recorded a total operating profit of around 7 trillion won in 2021 on the back of high oil prices and improved refining margins. (Yonhap)