Nesta lista
Petróleo

S Korea may rekindle US crude appetite amid high Middle East prices, fuel demand recovery

Petróleo

Platts Global Alert - Oil

S Korea may rekindle US crude appetite amid high Middle East prices, fuel demand recovery

Destaques

Feb US crude imports jump 60% on month at 8.69 mil barrels

At least 6 mil barrels/month expected to arrive in Q2

Vaccination program may propel gasoline, diesel demand recovery

Singapore — South Korean refiners are looking to revive US crude oil purchases over the coming trading cycles as major Middle Eastern suppliers maintain strong discipline over production levels and continue raising their official selling prices, while domestic transportation fuel demand is expected to improve following the launch of the mass vaccination program.

Não está cadastrado?

Receba e-mails diários com alertas, notas ao assinante; personalize sua experiência.

Cadastre-se agora

South Korea imported 8.69 million barrels of crude from the US in February, down 28.6% from a year earlier, but the shipments were up 60.2% from 5.43 million barrels received in January, placing the North American producer at the second-highest spot of the suppliers' list for the month, latest data from state-run Korea National Oil Corp. showed.

Middle Eastern crude supply remains tight, while major OPEC producers, including Saudi Arabia, Kuwait, Iraq and the UAE, have been consistently raising their official selling prices, prompting major South Korean refiners to tap into the North American market for top-up spot barrels, according to refinery feedstock trading sources in Seoul and a market analyst at Korea Petroleum Association.

"Depending on OPEC's production cut strategy for the second quarter, while also considering the uptrend in Middle Eastern official selling prices, South Korea may import at least three VLCCs, or around 6 million barrels, of US crude on average per month over Q2 and Q3," a crude oil and condensate procurement manager at a major South Korean refiner said.

Tight, expensive Middle Eastern supply

The OPEC+ alliance has so far displayed remarkable discipline in compliance with production cuts reported at 113.5% in February, Platts reported earlier.

This strong commitment to production curbs was reflected yet again in cuts to South Korean refiners' crude term allocations from Saudi Aramco, mostly ranging between 6%-10%, for April-loading barrels, according to refinery officials and industry sources based in Seoul, Ulsan and Yeosu with direct knowledge of the matter.

For the first two months in 2021, South Korea's crude imports from Saudi Arabia stood at 46.34 million barrels, down 7.3% from the same period a year earlier, the KNOC data showed. Crude imports from Kuwait over January-February fell 27.8% year on year to 17.5 million barrels, while shipments from Iraq tumbled 38.4% year on year at 10.72 million barrels.

As major Middle Eastern producers keep a lid on supplies, South Korean refiners are already feeling the pinch. Saudi Aramco has beaten market expectations by raising the April official selling price differential for its Arab Super Light crude to $2.35/b, the highest since August 2020, when it was set at $2.65/b against Platts Dubai and DME Oman, Platts data showed.

Similarly, the April OSP differentials for Extra Light, Arab Light and Arab Medium were raised by 60 cents/b, 40 cents/b and 20 cents/b, respectively, against Platts Dubai and DME Oman in March.

"Latest uptrend in the Brent-Dubai price spread should ideally make Middle Eastern grades competitive, but the Middle Eastern benchmark's discount against Brent has been largely offset by the OSP hikes," the crude and condensate trading source said.

"Besides, South Korean refiners typically buy North American crude on Dubai pricing basis, so the higher Brent-Dubai spread works in favor of spot US crude purchases," he added.

Fuel demand recovery

South Korea's refiners have been reluctant to buy high volumes of the light and middle distillate-rich refinery feedstock due to dismal domestic demand for gasoline, jet fuel and diesel.

However, the tide may turn as South Korea has launched a mass public vaccination program on Feb. 26, offering refiners some incentive to raise gasoline and diesel production and subsequently lift light sweet crude feedstock imports from the US, given the prospect of improved transportation fuel demand, market analysts at Korea Petroleum Association and KNOC said.

The end of winter low driving season has also come to an end and road transportation fuel demand will likely pick up significantly from this week, the analysts said.

The country's gasoline demand is expected to recover to around 236,000 b/d in Q2, up 4.9% from 225,000 b/d in Q1, according to S&P Global Platts Analytics data. Gasoil/diesel consumption is also expected to rise to 485,000 b/d in Q2, up 6.1% from 457,000 b/d in Q1.

However, any pick up in demand for middle distillates and light sweet US crude feedstock requirements could be limited as aviation fuel consumption remains subdued and local airlines are unlikely to expand international flight services any time soon due to the slow progress in both domestic and Asia-wide vaccination rollout, refinery officials and middle distillate marketing sources in Seoul told Platts.

The government administered a total of 680,560 vaccine shots so far -- 622,437 with AstraZeneca and 58,123 with Pfizer -- less than 2% of the country's total population of 52 million, according to the Korean Disease Control and Prevention Agency.

-------------------------------------------------------------------------------------------------------------------

South Korea's crude imports (Unit: '000 barrels)

Supplier
Feb-21
Feb-20
Change (y/y)
Jan-21
Change (m/m)
Saudi Arabia
23,948
23,460
2.1%
22,178
8.0%
US
8,693
12,178
-28.6%
5,427
60.2%
Kuwait
7,971
14,067
-43.3%
9,528
-16.3%
Mexico
5,994
3,950
51.7%
4,708
27.3%
UAE
5,317
10,250
-48.1%
4,906
8.4%
Iraq
4,894
7,754
-36.9%
5,821
-15.9%
Qatar
3,966
3,929
0.9%
5,830
-32.0%
Russia
2,850
6,509
-56.2%
4,229
-32.6%
Kazakhstan
2,132
1,070
99.3%
3,138
-32.1%
UK
2,089
0
N/A
5,370
-61.1%
Total*
74,973
86,304
-13.1%
76,874
-2.5%
Supplier
Jan-Feb 2021
Jan-Feb 2020
% Change
Saudi Arabia
46,339
49,996
-7.3%
Kuwait
17,499
24,239
-27.8%
US
14,120
25,698
-45.1%
Iraq
10,716
17,409
-38.4%
Mexico
10,702
8,997
19.0%
UAE
10,223
18,474
-44.7%
Qatar
9,796
10,469
-6.4%
UK
7,459
0
N/A
Russia
7,079
10,475
-32.4%
Kazakhstan
5,271
4,222
24.8%
Total*
151,847
179,016
-15.2%

*Includes other suppliers

Source: Korea National Oil Corp.