Singapore — South Korean roads and highways have registered an increase in passenger and commercial vehicle traffic volumes in recent weeks as economic activity gathers pace, paving the way for a rebound in the country's gasoline consumption in the second quarter.
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South Korea consumed 17.86 million barrels of gasoline in Q1, down 13% from a year earlier and 15% lower than Q4 last year, as transportation activities came to a halt at the height of the coronavirus outbreak in the country over February-March.
The tide has since turned, with shops, factories and companies ramping up business as the outbreak showed signs of being largely contained after the country recorded multiple days without a case of locally transmitted infection early this month. The most recent cluster of infections in Seoul entertainment venues and nightclubs has also been brought under control, with local transmissions falling back to under 10 on May 21.
Reflecting the revival in economic activities across the country, highway traffic has been on the increase. The number of vehicles on major highways over May 23-24 was up 12% from the weekend before at 4.5 million units, latest Ministry of Land, Infrastructure and Transport data showed.
Metropolitan traffic in Seoul has also been on the rise, with people returning to work opting to drive their own cars over taking public transport due to infection concerns, an official at Seoul's metropolitan government said.
As more people return to work and businesses re-open, combined with the growing preference for the usage of private cars over public transport, refinery officials were hopeful that the country's motor fuel demand would recover in Q2.
South Korea's gasoline demand may rebound to around 20.5 million barrels in Q2, up 14.8% from Q1, while diesel consumption could rise above 40 million barrels from 37 million barrels in Q1, according to 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 good news is that the worst of the Asian gasoline demand collapse is likely behind us, with more and more countries in the region now starting to reopen," said JY Lim, oil markets adviser at S&P Global Platts Analytics.
LOW PUMP PRICES
Industry officials said attractive retail pump prices in South Korea would also encourage passenger vehicle usage and help spur a rebound in auto fuels demand.
Pump prices of gasoline averaged Won 1,249/liter ($1.02/liter) in the second week of May, down 18.2% from Won 1,526/l in the same period a year earlier, according to KNOC data. Pump prices of diesel were down 23.8% to average Won 1,063/l to date in May, compared with Won 1,140/l in April and Won 1,294/l in March 2019.
The drop in South Korean retail motor fuel prices is in line with the downward momentum in the Asian gasoline and gasoil benchmarks. The price of FOB Singapore 92 RON gasoline, the most liquid Asian gasoline benchmark, averaged $21.97/b in April, down from $34.93/b in March and $62.23/b in February.
It has since recovered to $30.53/b to date in May, though most of the recovery in the outright gasoline benchmark has been driven by the recent rebound in crude oil prices rather than improvement in regional supply and demand fundamentals, trade sources said.
"The market is slowly recovering but expectations are for oversupply in Asia to last for quite a long time. We may probably see a good improvement from Q3 onwards," a Singapore-based trader said.
In the Asian gasoil market, benchmark 10 ppm sulfur gasoil prices for loading from Singapore hit a record low in April on an overhang of regional gasoil volumes. The FOB Singapore 10ppm sulfur gasoil marker averaged $31.42/b in April, down from $45.48/b in March and $65.97/b in February, Platts data showed.