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Mon 27 Oct 2008 10:16

Neste Oil reports 'surprisingly strong' fuel oil margins


Finnish supplier posts robust Q3 results due to record total refining margin.

Finnish refiner and bunker supplier Neste Oil has reported a comparable operating profit of EUR 199 million for the third quarter of 2008, compared to EUR 159 million for the same period last year.

The robust third quarter figures were significantly higher than predicted in a Reuters poll, which produced a comparable operating profit estimate of EUR 154 million.

Neste Oil also reported a new record refining margin of USD 13.54 per barrel, which exceeded the USD 10.20 per barrel margin recorded during the third quarter of 2007.

The company said refining margins had improved in the third quarter mainly because of disruptions in oil production and at refineries in the US Gulf, caused by hurricanes Gustav and Ike. Declining crude oil prices also supported product demand.

Fuel oil margins were "surprisingly strong", according to Neste Oil. The company said marine fuel oil was in good demand in East and South-East Asia and was shipped there from Europe. In addition, fuel oil for power production use was in demand in the Persian Gulf.

The company also announced, however, that its operating profit had decreased to EUR 44 million during the last quarter, from EUR 180 million in the third quarter of 2007. Neste Oil said that it had seen an inventory loss of EUR 180 million due to rapidly falling oil prices and warned that it expected an inventory price hit in the fourth quarter.

Commenting on the results, Jarmo Honkamaa, Deputy CEO said "We are satisfied with our strong results in what was a really exceptional environment in the third quarter. The oil market witnessed even higher-than-normal volatility, and crude oil prices dropped rapidly and significantly after rising for eight months. This was reflected in our IFRS operating profit for the quarter, which includes a large inventory loss."

"Our comparable operating profit, which best reflects the company's operational results, was among the highest in our history. This was largely thanks to our high total refining margin, supported by a strong diesel market, and another good quarterly result by Shipping."

"Demand for middle distillates and diesel continues to be the main driver of refining margins. I am pleased to say that all our diesel production units are operating normally again after maintenance carried out at the Porvoo diesel line in August and September," Honkamaa concluded.

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