South Korea's jet fuel demand could fall below 100,000 b/d in Q1 2025 as tourism slumps after Yoon's coup attempt

South Korea's jet fuel demand is expected to decline from December as tourist arrivals slow amid domestic political unrest, while a sharp drop in the local currency may also discourage overseas travel during the winter, middle distillate sales participants and analysts said over Dec. 20-24.

Following President Yoon Suk-yeol's insurrection -- described by local media and judicial officials as a "coup d'etat attempt" -- on Dec. 3, the UK Foreign, Commonwealth and Development Office issued a travel alert for South Korea, and the US Department of State raised a Level 1 travel advisory for the country. Japan has yet to formally impose any travel restrictions but has warned its citizens to remain vigilant.

Tourist arrivals in the first half of December were estimated to have dropped 2%-3% compared with the same period before the pandemic in 2019, Kim Jung-hoon, director of tourism policy at the Ministry of Culture, Sports and Tourism, said.

Group tourist bookings have declined significantly in the past couple of weeks, and the ministry is sending statements and letters worldwide to reassure travelers that South Korea is safe to visit, although the outlook for tourist arrivals in the first quarter of 2025 remains uncertain, Kim added.

Jet fuel demand and flight traffic surpassed prepandemic levels early this year, reaching record highs in October, but the recent series of political conflicts does not bode well for the nation's tourism and jet fuel sales, according to middle distillate marketers and sales executives at two major South Korean refiners.

Jet fuel sales rose 9.6% year over year to 3.487 million barrels in October, setting a record monthly high, the latest data from state-run Korea National Oil Corp. showed. Meanwhile, inbound and outbound flight passengers at South Korea's Incheon International Airport increased 16.8% year over year to 5.98 million in November, the latest data from the airport showed.

However, the latest S&P Global Commodity Insights survey of 11 middle distillate marketers, traders and industry analysts based in Seoul indicated that South Korea's jet fuel demand in December could drop to around 3.1 million-3.2 million barrels, with demand in Q1 2025 potentially sliding to around 100,000 b/d or lower, depending on how quickly the nation can establish a new government leadership structure.

While many Asian countries have not formally issued travel warnings to South Korea, new group flight bookings for Southeast Asia-South Korea round-trip tickets have significantly declined in the past couple of weeks, according to sales and ticketing managers at AirAsia and Korean Air.

Platts, part of Commodity Insights, assessed second-month Singapore jet fuel crack swaps against Dubai crude swaps at an average of $15.32/b so far in December, compared with an average of $16.37/b in November.

Weak currency

A sharp decline in the South Korean won against the US dollar may also discourage domestic consumers' demand for overseas travel.

Travel package sales for the December-February period to Europe, Southeast Asia and Japan could all fall below previous winter cycle sales, according to marketing and commercial managers at major South Korean travel agencies, including Interpark Global and Kyowon Tour.

According to Bank of Korea data, the dollar-won exchange rate was quoted at Won 1,451.94 during the morning Seoul trading session on Dec. 24, compared with Won 1,403.96 at the start of the month.

Foreign fund repatriation accelerated after President Yoon declared martial law on Dec. 3. The South Korean won remains under pressure despite the impeachment bill passed on Dec. 14, as Yoon, acting President Han Duck-soo and the ruling party's resistance to arrest and investigation regarding the coup attempt have undermined investor confidence, according to refining industry sources and financial market analysts.