Singapore — South Korea's auto fuel demand appears likely to extend a recent fall, with sharp declines in vehicle sales and road traffic volumes amid Seoul's ongoing battle to contain the spread of COVID-19, painting a tepid gasoline and gasoil consumption outlook for the rest of the first quarter.
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South Korea consumed 11.78 million barrels of gasoil in January, down 23.5% from 15.4 million barrels a year earlier, according to latest data from state-run Korea National Oil Corp., or KNOC.
This marked the biggest decline since June 2008, when gasoil consumption had dropped 25.8% from a year earlier.
The 11.78-million-barrel consumption was the smallest volume since September 2019, when the country used 10.86 million barrels, and 10.65 million barrels in February 2014.
Gasoline demand also dropped 16% year on year to 6.15 million barrels in January, compared with 7.33 million barrels in the same month last year.
This marked the sharpest decline since October 2018, when gasoline demand slumped 16.6% -- the biggest drop in 20 years since October 1998 during the Asian financial crisis.
The country looks poised to register even sharper declines in auto fuels consumption throughout the first quarter.
According to the state-run Korea Expressway Corp., auto traffic on the country's highways dropped 25%-29% over the weekend from a year earlier, while passengers of KTX bullet trains plunged over 84%.
Furthermore, South Korean auto manufacturers posted sharp declines in new vehicle sales in February. Combined sales in both domestic and overseas markets fell 10.7% year on year to 505,212 units in February, led by a 13% drop in sales by the country's biggest automaker Hyundai Motor, according to the Ministry of Trade, Industry and Energy, or MOTIE.
In particular, new vehicle sales in the domestic market dropped 21.7% year on year to 81,722 units in February, the lowest since January 2009, when the country was hit by the global financial crisis.
"The shrinking traffic flows and car sales would further affect demand of transportation fuels in February and thereafter," a MOTIE official said.
Reflecting the downbeat signals for domestic consumer demand, South Korea could see its diesel fuel and gasoline consumption tumble to around 45 million barrels in Q1, according to traders and fuel marketing sources at major South Korean refiners SK Innovation, S-Oil Corp., GS Caltex and Hyundai Oilbank surveyed by S&P Global Platts.
The survey estimate is equivalent to around a 29% fall from 63.41 million barrels consumed during the same period a year earlier, Platts calculation based on KNOC data showed.
Adding to the bleak demand outlook, the country's central bank Bank of Korea, or BOK, said the economy may shrink in Q1 due to the coronavirus outbreak.
The BOK has slashed its 2020 growth outlook for the country to 2.1% from the previous 2.3%, compared with an estimate of 2.1% expansion in 2019.
Many local and foreign banks and economic organizations forecast South Korean economy to grow by less than 2% this year.
The country's construction, transportation and manufacturing activities came to a halt after President Moon Jae-in on February 23 raised the country's alert level to its highest, prompted by a surge in the number of confirmed infections.
The Korean Centers for Disease Control and Prevention, or KCDC, reported 438 new COVID-19 cases, bringing the total number of infections to 5,766, with 35 deaths as of Thursday morning.
With public fears mounting, citizens are extremely reluctant to go out for travels, shopping or other activities, while the KCDC has urged people to stay indoors, which would significantly curb auto oil consumption in the country.