SOUTH KOREA DATA: US crude imports reach record high in 2024 as refiners monitor Dubai price spike

South Korea purchased a record-high volume of US crude in 2024, and local refiners plan to continue sourcing North American barrels throughout 2025 to optimize their feedstock economics amid a recent spike in the price structure of Middle Eastern sour crude.

Major South Korean refiners and petrochemical companies, including SK Innovation, Hyundai Oilbank and Hanwha Total, collectively imported 168.43 million barrels of US crude last year, up 18.3% from 2023. This marked the largest annual US crude purchase in Asia, according to an analysis by S&P Global Commodity Insights, based on data from the state-run Korea National Oil Corp.

Refiners generally preferred US crude last year, as the official selling prices of Middle Eastern sour crude were often higher than market consensus in the first half of 2024. Additionally, logistical costs for Persian Gulf sour crude remained high throughout the year due to expensive shipping insurance fees, according to feedstock managers at two South Korean refiners.

Furthermore, the South Korea-US free trade agreement allows local refiners to purchase light, sweet US crude cargoes at lower costs than other Asian buyers. The FTA enables cost reductions of up to $2/b for WTI Midland crude purchases, as noted by a trade source from a South Korean refiner's feedstock trading team in Singapore.

Moreover, the refining efficiency and cracking margin for light sweet US crude are among the best, particularly during periods of weak cracking margins, as WTI Midland features a low boiling point and excellent middle distillate yield, according to linear programming model strategists at three South Korean refiners.

Refiners in South Korea, Japan and Taiwan were optimistic that US crude flows to the Far East will remain abundant in 2025. They believe that the Trump administration's support for the US upstream industry will ensure ample light sweet US crude offers in the Asian market.

Persian Gulf premium

In 2025, South Korean refiners are expected to source over two-thirds of their crude requirements from Middle Eastern suppliers, as the Persian Gulf sour grades remain their staple feedstock. However, the recent spike in the Dubai price structure, following new sanctions on Russian oil trades, may encourage refiners to consider US crude and other grades offered by suppliers in the Americas, according to traders and refinery feedstock management sources.

As Asia's third-largest crude importer, South Korea took 343.29 million barrels from Saudi Arabia in 2024, up 0.7% year over year, while shipments from the UAE rose 28% to 140.64 million barrels over the same period, according to KNOC data.

Middle Eastern crude OSPs are expected to surge in the near term as the Dubai market structure has jumped in recent weeks. Local refiners are cautiously monitoring demand for Middle Eastern sour crude from Chinese and Indian traders following the new sanctions on Russian oil trades. The cost of sour crude procurement could escalate if all major Asian buyers compete for Persian Gulf medium and heavy sour grades, according to feedstock management sources at South Korean refiners.

Platts, part of Commodity Insights, assessed the spread between front-month cash Dubai and the same-month Dubai swap at $5.04/b on Jan. 17, the widest since $5.48/b on Oct. 11, 2022. The spread has averaged $3.26/b so far in January, compared with an average of $1.109/b in December 2024.

The Dubai market structure is considered a key component in the monthly OSP calculations of major Middle Eastern producers.

"We still need to commit to sizable term purchase agreements with key Middle Eastern suppliers to secure staple sour grades, but [Persian Gulf] spot market deals can be flexibly adjusted to accommodate more economical options outside the Persian Gulf market, such as the Americas," said a senior feedstock and logistics manager at a South Korean refiner based in Ulsan.

US President Donald Trump recently pledged to impose new tariffs on all imports from Mexico, and it will be interesting to see how Pamex reacts. According to a feedstock manager at another major South Korean refiner, these tariffs could lead them to rely more on Asian buyers in 2025.

Several North Asian refiners previously told Commodity Insights that they would monitor any potential slowdown in Mexican and Canadian crude flows to US refineries this year, which could result in more attractive offers for Asian buyers of Isthmus, Maya, Cold Lake Blend and Western Canadian Select crudes.

Mexico was South Korea's seventh-largest crude supplier in 2024, with local refiners importing 26.5 million barrels of light and heavy sour grades from Pamex.

South Korea's top 10 crude suppliers in December

South Korea's top 10 crude suppliers in 2024

*Includes other suppliers

Source: Korea National Oil Corp.