The performance of Korean oil refineries is expected to continue a gradual rebound, with improving refining margins, industry sources said Wednesday.

The benchmark Singapore complex gross refining margin, which peaked at $9.9 per barrel in January, plummeted to $4.9 per barrel last month. The index, however, started to rebound to $5.4 per barrel in the first week of July. 

The index indicates the difference between the total value of petroleum products coming out of an oil refinery and the cost of crude.

Local oil refineries consider around $4 to $4.5 as the break-even point for the refining margin. June’s figure --$4.9 -- was nearly close to such a break-even point.

Although the refineries expressed concerns over poor performances led by the lowering refining margin in the second quarter, the rebounding oil price supported them by through a “lagging effect.”

While the refineries are still concerned about the refining margin level amid the aftermath of the Brexit vote, some are raising speculations that the refining margin will continue rebounding.

“The refining margin seems to have been on the rebound after hitting the low in June. The figure will continue going up from this month,” said analyst Lee Do-yeon at Korea Investment & Securities.

Earlier this month, Saudi Arabia announced that it would cut all official selling prices for its crude sales to Asian and U.S. clients. The official selling price indicates the difference between the average price of Oman and Dubai oil, and the sales price that Khobar-Saudi Aramco offers to Asia. Lowering the official selling prices suggests that the oil prices in Asia will go down.

“The change of official selling prices consequently affects the oil prices settled by other countries such as Oman and United Arab Emirates. A price drop means that the crude oil market is that much competitive,” said an industry source. 

By Lee Hyun-jeong  (rene@heraldcorp.com)