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South Korea's auto fuel demand tracking economic recovery: KNOC

South Korea's transportation fuel demand increased in the third quarter despite higher retail prices, as overall economic activity in Asia's fourth-biggest energy consumer picked up during the period, an official at state-run Korea National Oil Corp. said Thursday.

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The country's gasoil consumption climbed 4.8% year on year to 43.35 million barrels over July-September, compared with 41.39 million barrels a year earlier, according to the latest KNOC data.

For the first nine months, gasoil demand rose 2.3% year on year to 125.53 million barrels, from 122.72 million barrels in the year-ago period.

Meanwhile, consumption of gasoline in Q3 edged up 0.3% year on year to 21.12 million barrels. For the first nine months, South Korea consumed 59.57 million barrels of gasoline, higher than 59.23 million barrels a year earlier.



"The rise in the auto fuels in the third quarter came despite higher retail prices [which is linked to] rising crude oil import prices," a KNOC official said.

"Average auto fuel prices in Q3 rose from a year earlier, but declined compared with Q2 and Q1, which helped boost domestic demand," the KNOC official said.

Pump prices of 92 RON gasoline climbed 2.6% year on year to average Won 1,456/liter -- equivalent to about $1.30/liter -- in Q3, compared with Won 1,419/liter a year earlier, according to the KNOC official.

The average retail price in Q3 however, was lower than the average Won 1,476/liter in Q2 and Won 1,510/liter in Q1.

Gasoil retail prices rose 2.9% year on year to average Won 1,248/liter in Q3, from Won 1,213/liter a year earlier, but down from the Q2 average of Won 1,267/liter and Won 1,301/liter in Q1.

On the back of strong transportation fuels demand, South Korea's total oil products demand climbed 2.3% year on year to 234.29 million barrels in Q3, from 229.15 million barrels in the year-ago period.

For the first nine months, total oil products demand rose 1.8% year on year to 692.7 million barrels.


Q3 GDP GROWTH


Auto fuels demand is expected to stay strong in the fourth quarter if retail prices could remain on the downward path in the coming months because the domestic economy has rebounded, the KNOC official said.

The country's oil demand has been highly correlated to overall economic conditions as well as retail prices, he added.

South Korea's gross domestic product grew 1.4% in Q3 from the previous quarter, faster than the 0.6% on-quarter GDP growth in Q2, according to the Bank of Korea.

The 1.4% on-quarter rise is the fastest growth since the second quarter of 2010, when the economy expanded 1.7%.

The central bank forecast South Korea's economic growth to reach 3.2% for the full 2017, up from 2.8% last year.


LPG CONSUMPTION FALLS


In stark contrast, higher retail prices took their toll on South Korea's LPG demand.

The country's LPG consumption fell 9.1% year on year to 26.16 million barrels in Q3 as retail prices rose by high single-digit percentages, while recent decline in the number of LPG-powered cars also weighed on the fuel demand.

Retail propane prices rose 8.5% year on year to average Won 1,792/kg in Q3, while retail butane prices climbed 7.7% year on year to average Won 2,006/kg in Q3, according to the KNOC official.

The country's LPG demand for transportation fell 5.6% year on year to 9.63 million barrels in Q3, compared with 10.2 million barrels a year earlier.

LPG demand for petrochemicals production dropped 23.1% year on year to 9.68 million barrels over July-September, compared with 12.58 million barrels in the same quarter last year.

-- Charles Lee, newsdesk@spglobal.com
-- Gawoon Philip Vahn, philip.vahn@spglobal.com
-- Edited by Irene Tang, newsdesk@spglobal.com