South Korea’s leading refiner and chemical company SK Innovation on Wednesday said it has swung to red with an operating loss of 1.7 trillion won ($1.3 billion) in the first quarter -- its worst performance amid the sharp slump in global demand due to the COVID-19 pandemic.

The company recorded revenue of 11.1 trillion won, a 12.6 percent drop on-year. Its operating loss was triggered by its ailing petrochemicals business, which lost 1.6 trillion won in the first quarter.

“Due to a sharp fall in oil prices, SK Innovation suffered an inventory loss worth 941.8 billion won. Also, due to the sluggish demand for petroleum products triggered by the COVID-19 outbreak, aviation fuel and gasoline became cheaper than crude oil, which led to an operating loss of 1.6 trillion won in petrochemicals business alone,” a company official said.

Other refiners such as S-Oil and Hyundai Oilbank are also teetering on the edge.

On April 27, S-Oil -- whose 63.4 percent stake is owned by Saudi Arabia’s state-run oil giant Saudi Aramco -- posted an operating loss of more than 1 trillion won in the first quarter, the worst figure since it started business in 1976.

Hyundai Oilbank also swung sharply into the red, recording an operating loss of 563.2 billion won in the first quarter from an operating profit of 100.8 billion won in the same period last year.

“This is not the first time Hyundai Oilbank is facing an oil shock, but the outlook for the second quarter doesn’t look good,” a company official said.

“Korea has a weak domestic market, so there are only few companies that can cope with the global demand shock.”

However, the worst is yet to come as refiners face a bleak outlook.

“As the COVID-19 outbreak peaked in April, demand for oil must have seen the biggest plunge in that month. In May and June, the demand for oil will be cut significantly compared to last year,” said Lee Dal-sok, a senior researcher from Korea Energy Economics Institute.

“The oil demand shock will continue until June. In May and June, the market situation will be in a state of anomie” said Han Seung-jae, an analyst at DB Financial Investment.

“Demand for gasoline and aviation fuel is taking the biggest hit. Gasoline demand might slightly improve, but unless global travel restrictions are alleviated, there will be no rebound for aviation fuel demand.”

By Kim Byung-wook (kbw@heraldcorp.com)