South Korean refiners confident in securing ample US crude despite India's strong interest

South Korean refiners are confident they can secure ample light sweet US crude throughout 2025, despite India's strong interest in North American barrels this year. Asia's third-largest crude buyer is expected to consistently procure around 10 million barrels monthly.

Tighter sanctions on Russian crude trades seem to have encouraged Indian state-run refiners and traders to shift their focus to US crude from Russian Urals over the recent trading cycles. However, according to refinery feedstock managers and industry analysts based in Seoul and Ulsan, last year's top Asian US crude customer, South Korea, would still be able to procure between four and six VLCCs of US crude on a monthly basis.

It would be extremely difficult for Indian refineries to drastically alter their feedstock configuration and linear programming models to accommodate more US crude, while South Korean refiners hold big trading advantages, largely due to the US-South Korea free trade agreement and Seoul's freight incentives for purchasing non-Middle Eastern crudes, feedstock managers at major South Korean refiners, including SK Innovation, told Platts.

"As far as typical refinery configuration is concerned, Indian companies may not be able to excessively increase lighter and sweeter US crude intake ... furthermore, US suppliers won't be able to favor just a select few Asian buyers due to highly complicating longer-term supply commitments and business-to-business trading dynamics," said a feedstock management source at a major South Korean refiner who refused to be identified due to the sensitive nature of corporate trading relationships.

Meanwhile, SK Innovation indicated that US crude is expected to make up around 20% of its overall first-quarter feedstock import basket. South Korea's top refiner has secured feedstock term contracts tied up with major Middle Eastern sour crude suppliers, and plenty of other non-Persian Gulf supplies would also be explored throughout the year, depending on the changing market structure and price trends, a company operation source based in Seoul told Platts.

South Korea imported 168.43 million barrels of US crude in 2024, representing an 18.3% increase from 2023 and marking the largest annual US crude purchase in Asia last year, according to an analysis by Platts, based on data from the state-run Korea National Oil Corp.

S&P Global Commodities at Sea ship tracking software showed that US crude exports to India have increased. So far in February, the US has exported 439,000 b/d of WTI crude to India, up from 145,000 b/d in January.

India may fill the Chinese gap

As for the overall balance of US crude sales to Asia, Indian refiners are expected to make up for a potential sharp decline in China's WTI Midland purchases, traders based in Singapore and refinery feedstock managers across Northeast Asia with close knowledge of spot US cargo bids and offers in the Asian market.

"US crude will not bode well for Chinese refiners' margins due to additional tariffs ... the market is expecting Chinese traders to slash WTI Midland intake this year but Indian buyers can easily fill that gap," said a trading team manager at a US petroleum company based in Singapore with close knowledge of WTI Midland trades in Asia.

Beijing announced Feb. 4 that it will impose an additional 15% tariff on US coal and LNG imports and a further 10% tariff on US crude imports, effective Feb. 10, in retaliation to the 10% tariff imposed by US President Donald Trump on Chinese goods starting Feb. 4.

"The additional 10% cost will nearly remove US crudes from our watchlist... the US volume is minimal and easily replaceable," a crude procurement strategist with a leading state-run Chinese refiner told Platts previously.

Trading advantages

The global sweet crude complex is looking rather attractive, while the recent spike in the Middle Eastern sour crude price structure could encourage South Korean, Taiwanese, Thai and Japanese refiners to keep an eye on WTI Midland offers and low sulfur West African, North Sea and Mediterranean spot crude trading opportunities, according to traders and refinery sources based in Singapore, Seoul, Bangkok and Tokyo.

Platts, part of S&P Global Commodity Insights, assessed the Brent/Dubai Exchange of Futures for Swaps (EFS) at an average of 84.5 cents/b to date in February, down from January's average of $1.5/b and the 2024 average of $1.56/b. A weaker EFS generally makes various sweet crude grades across the globe more economical compared with Dubai-linked Middle Eastern sour grades.

For South Korea, lighter and sweeter US crude is sometimes seen as cheaper than various Saudi and Abu Dhabi grades, thanks largely to the FTA with the US and the government's freight rebate scheme.

The FTA enables cost reductions of up to $2/b for WTI Midland crude purchases, according to a trade source from a South Korean refiner's feedstock trading team in Singapore. Seoul also has extended its freight incentive program for crude oil imports from non-Middle Eastern regions, which would last until Dec. 31, 2027. This scheme, designed to reduce reliance on Middle Eastern crude, offers a rebate of up to Won 16/liter (1.4 cents/liter) for shipments from the Americas, Africa, North Sea, and Mediterranean markets.