South Korea data: US crude imports set to fall further amid weak gasoline, jet fuel demand

Seoul — South Korea's crude oil imports from the US tumbled once again in August and the Asian consumer is poised to further reduce North American oil shipments in the coming months, as local refiners require less light sweet crudes amid faltering domestic fuel consumption.

South Korea imported 4.45 million barrels of crude from the US in August, down 59.7% from a year earlier, according to data released by Korea National Oil Corp. on Sept. 28. The August shipments from the US were also down 15.1% from 5.244 million barrels imported in July.

The cutback in US crude imports in August marks the fourth consecutive monthly decline after registering a drop of 40.8% in June and a 35.7% fall in May on a yearly basis.

Majority of US crude that South Korean refiners purchase consist of light sweet grades including WTI and Eagle Ford, but these companies are reluctant to buy high volumes of the light and middle distillate-rich refinery feedstock due to dismal domestic fuel demand, especially gasoline and jet fuel.

South Korea's US crude imports are estimated at around 15 million barrels in the third quarter, down 61% from the same period last year. The country is poised to further reduce US crude purchases in Q4 to around 13 million barrels, according to feedstock trading managers at major South Korean refiners SK Innovation, S-Oil Corp, GS Caltex and Hyundai Oilbank surveyed by S&P Global Platts.

"Jet fuel demand and requirements have very much dissipated due to the ailing aviation industry ... gasoline demand is also poised to hit the year's low during winter," said an official at GS Caltex based in Seoul.

South Korea consumed 1.39 million barrels of jet fuel in August, down 51.2% on the year, and marking the seventh consecutive month of year-on-year decline. Over January-August, jet fuel consumption was down 41.2% on the year at 14.94 million barrels, with local airlines having suspended most flights on international routes since March.

WTI flips to premium

In addition, South Korean refiners highlighted that WTI remains much more expensive than previous years when the light sweet crude benchmark was heavily discounted against various Middle Eastern grades.

The spread between WTI Magellan East Houston, or MEH, on a CFR North Asia basis and Abu Dhabi's Murban on an Asia delivered basis has averaged $1.38/b to-date this year, more than minus 6 cents/b in 2019 and minus 38 cent/b in 2018, Platts data showed.

"Lighter and sweeter crudes typically cost more, so it wouldn't be bad to pay up a little premium for US grades. But considering the discounts we've seen in previous years, WTI has lost its appeal [to Asian buyers]," a Seoul-based Korea Petroleum Association official said.

Middle Eastern crude oil

Sluggish domestic fuel demand has also taken its toll on South Korea's refinery feedstock imports from other suppliers.

South Korea's crude imports from its top supplier Saudi Arabia fell 28.7% on the year to 21.999 million barrels in August, the KNOC data showed.

On Sept. 5, Saudi Aramco lowered its official selling prices for crude oil to load in October and bound for Asia by 90 cents-$1.50/b a bid to woo its Asian customers.

But South Korean refiners said they would not raise crude purchases from Saudi Arabia and other Middle Eastern suppliers due to faltering domestic oil products demand and relatively low refinery run rates in the wake of the recent resurgence of the coronavirus in the Asian country.

South Korea's crude imports from Kuwait nearly halved to 8.041 million barrels in August, from 15.148 million barrels a year earlier, while intake of Qatari grades also declined 16.8% on the year to 6.031 million barrels last month.

In total, South Korea -- the world's fifth biggest crude buyer -- imported 78.949 million barrels, or 2.55 million b/d, of crude oil in August, down 17.6% from a year earlier.

The August shipments were also down 7.5% from July's 86.446 million barrels.

For the first eight months, the country's crude imports dipped 8.7% year on year to 664.291 million barrels.

SOUTH KOREA'S CRUDE IMPORTS (Unit: '000 barrels)

*Total includes other suppliers

Source; Korea National Oil Corp.