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South Korea sees tight bunker fuel supply on blending issues at S-Oil

London — The South Korean bunker fuel market has been facing tight supply since Monday, with refiner S-Oil unable to deliver on-specification fuel due to blending issues.

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Problems with blending high sulfur fuel oil to bunker fuel at S-Oil's refinery led to off-spec bunker fuel, a source with the company confirmed. S-Oil typically blends HSFO with slurry, with the resulting product channeled into the bunker fuel market.

The refiner will not be able to supply bunker fuel in the spot market this week, the source added.

Market sources said the off-spec had to do with the water content, though S-Oil declined to elaborate on that.

The resulting pullback in bunker fuel supply from the refiner affected availability in South Korea's bunker market. "Many inquiries [spilled over] to the market with urgency; it's difficult to handle [the volumes]," one supplier said.

Terminal loadings were also heard affected by the off-spec fuel. "The pipe which loads oil from the tank to the barge was affected," a trader said.

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"Inventory is ample and there is no cargo export this month. Once the blending issue is solved, supply will be back to normal," a source close to the refiner said, adding that it is not related to the new residue upgrading unit.

S-Oil had exported HSFO over October-November last year after issues arising from its new residue upgrading unit at its Onsan refinery led to the production of excess product. This had reduced supply to the bunker fuel market.

Low sulfur marine gasoil was also facing tightness in the South Korean market this week. Winter weather hampering the transportation of LSMGO from Hyundai Oilbank's refinery in the northwest part of the country to their tanks in Busan has hurt the availability of the fuel. Hyundai is the largest supplier of LSMGO in South Korea.

A second refiner, SK Trading International, was also understood to be low on stocks, market sources said.

"There has been a delay due to weather conditions. Supply will be back to normal soon," a source close to the refiner said.

--Su Ling Teo, su.ling.teo@spglobal.com

--Edited by Shashwat Pradhan, shashwat.pradhan@spglobal.com