Nov 23, 2021
South Korea’s crude oil imports in October rose 1.9% from a year earlier, reflecting the country’s rising refinery run rates as Seoul rapidly eases COVID-19 restrictions, while major refiners plan to actively purchase spot cargoes from non-OPEC producers amid tight Middle Eastern supply.
The world’s fifth-biggest crude importer received 11.419 million mt, or 83.7 million barrels, of crude oil last month, compared with 82.14 million barrels imported a year earlier, data from the Korea Customs Service showed. The October imports were also up 6.4% from 78.63 million barrels received in September.
The country’s crude imports are on course to a full recovery to levels seen before the outbreak of the pandemic as major refiners raise run rates to lift transportation fuel production amid easing domestic and international movement restrictions with the government’s call to shift to a phase of living with COVID-19 from Nov. 9, refinery and industry sources told S&P Global Platts.
South Korea’s top refiner SK Innovation raised its average crude throughput to 68% in the third quarter, from 66% in Q2 and 63% in Q1, while the country’s second-biggest refiner GS Caltex raised its average refinery run rate to 92% in Q3 from 88% in Q2 and 83% in Q1.
No. 3 refiner S-Oil Corp. also boosted its run rate to average 99.2% in Q3, compared with 90.7% a year earlier, 98.8% in Q2 and 94.4% in Q1.
South Korea’s crude imports are likely to continue to rise during Q4 as Seoul’s decision to phase out coronavirus restrictions and guide the nation back to normal life encouraged the major refiners to further boost their run rates and middle distillate fuel output.
The country’s nationwide run rates were estimated to have averaged around 81% in the first 10 months, lower than the average 84% during the same period in 2020, according to latest data from Korea Petroleum Association and industry information collected from major refiners by S&P Global Platts.
In Q4, the average nationwide run rate could rise above 85%, according to multiple refinery operation and fuel marketing managers at the major refiners surveyed by Platts.
On top of the improving domestic demand, refiners are further encouraged to raise runs on expectations of recovery in middle distillate exports.
“International sales margins have improved as movement restrictions ease across Asia, while Chinese oil products have decreased in the regional spot market due to the power crunch in the country and limited export quotas for Chinese refiners,” a light and middle distillate product marketer at S-Oil said.
With OPEC members, especially Middle Eastern producers, seemingly hesitant to accelerate the pace and scale of their crude production hike strategy, South Korean refiners would actively purchase non-OPEC crudes in the spot market, refinery feedstock trading managers based in Seoul and Singapore said.
US crude oil would continue to be South Korea’s top choice for non-OPEC supply, while other producers including Mexico and Kazakhstan are also attractive supply sources, the feedstock trading managers added.
“The overall Middle Eastern sour crude supply is still very tight and both term and spot cargoes are very expensive…it’s much better to find more economical barrels outside the Persian Gulf,” a sour crude trader at a major South Korean refiner said.
The physical Dubai crude market structure strengthened sharply in recent trading cycles, with the spread between front-month Platts cash Dubai and same-month Dubai swap averaging $3.62/b to date in November, on course to possibly set the record-high monthly spread, Platts data showed.
The customs data showed South Korea’s October intake of US crude, mostly light sweet grades, rose 3.7% year on year to 9.44 million barrels, marking the seventh consecutive month of year-on-year increase.
In contrast, imports from its top supplier Saudi Arabia fell 11.1% year on year to 27.03 million barrels, in October.
South Korean refiners paid on average $67.72/b for Saudi crude shipments over January-September, latest data from state-run Korea National Oil Corp. showed.
In comparison, shipments from the US cost an average $67.57/b over the same period, while the refiners paid on average just $59.18/b for Mexican crude grades, including Isthmus and Maya, imported in the first nine months, KNOC data showed.
KNOC will release detailed oil trade data for October in the week of Nov. 28.