South Korea urges citizens to leave Iran, Israel; refiners' Dubai-based oil trading unaffected

The South Korean government has urgently advised citizens and businesses in Iran and Israel to evacuate due to rising geopolitical tensions, but oil trading operations of major refiners in the Middle East and their key Dubai offices will remain unaffected, industry sources and foreign ministry officials said June 18.

Starting from June 17 at 20:00 South Korean time, a Level 3 travel advisory recommending citizens to leave will be issued for the existing special travel advisory areas in Israel, the Ministry of Foreign Affairs said in a recent announcement.

In a related update, the foreign ministry said that as of June 17 at 13:00 South Korean time, a Level 3 travel advisory recommending citizens to leave will apply to all regions in Iran.

"The current travel advisory status for Israel indicates that Level 4, which prohibits travel, applies to the northern border area with Lebanon (within 4 km from the border) and the Gaza Strip. Meanwhile, Level 3, which recommends citizens leave, now applies to other regions in Israel and to all areas in Iran," a senior official at the ministry said.

Meanwhile, major South Korean refiners' offices in Dubai and other key business hubs across the Middle East will continue normal operations.

An official from MOFA, along with sources from the Consulate General in Dubai, indicated that it is highly unlikely the ministry will issue any evacuation warnings for the thousands of South Korean professionals working in the UAE, Saudi Arabia, Kuwait, Qatar, Oman and Iraq.

Crude oil trading and logistics managers at major South Korean refiners, including S-Oil and SK Innovation, along with market monitors at the Korea Petroleum Association, said that Saudi crude term contractual lifting for June is proceeding smoothly.

Additionally, June-loading spot cargoes purchased during the April trading cycle are being loaded without any interruptions or issues so far, they added.

Middle East supply

South Korea relies on Middle Eastern suppliers for more than two-thirds of its total crude oil requirements. As Asia's third-largest crude importer, the country purchased 232.7 million barrels from Persian Gulf suppliers in the first four months of the year, accounting for around 71.1% of its total crude intake of 327.2 million barrels during that period, according to the latest data from state-run Korea National Oil Corp.

"While there is an apparent maritime risk alert, everything has been proceeding well so far," a logistics management source at S-Oil told Platts, part of S&P Global Commodity Insights. S-Oil is 63.4% owned by Aramco Overseas Co., a subsidiary of Saudi Aramco.

"As for June-loading spot cargoes purchased during the April trading cycle, the tankers are filling on schedule without any notable delays or issues," said a feedstock and logistics manager at a major South Korean refiner based in Ulsan.

For July, Aramco has likely allocated its full term crude oil supply to Asian refiners, with volumes to China remaining steady and allocations to other refiners unchanged month over month.

July allocations to Chinese refiners and traders were heard at 47 million barrels, largely stable from the 47.5 million barrels allocated for June. Sources from five North Asian refiners outside China, a Southeast Asian refiner and a South Asian refiner reported receiving their requested volumes from Aramco for July.

Although traders and refiners across Asia broadly expressed confidence that physical Middle Eastern sour crude supply and Persian Gulf-Far East trade flows are likely to remain largely unaffected by the conflict between Israel and Iran, their primary focus remains on rising freight costs and a higher Dubai price structure.

Platts assessed the spread between cash Dubai and same-month Dubai swap at $2.425/b on June 17 -- marking the highest level since $2.53/b on April 3.

The spread -- widely known as the Dubai market structure -- is considered a key component in the monthly official selling price calculations of major Middle Eastern producers.

Early this month, Aramco cut the Asia-bound July OSP differential for its flagship Arab Light crude by 20 cents/b month over month to a premium of $1.20/b to the average of Platts Dubai and GME Oman for the month of loading.