SOUTH KOREA DATA: November crude imports increase but short-term throughput is under pressure

Strong points

First quarter spot crude purchases expected to drop amid fragile demand

U.S. crude imports increase year-over-year for 8th consecutive month

Refiners continue to find Middle East crude prices expensive

South Korea’s crude oil imports in November were up 14.2% from a year earlier, as local refiners increased their throughput of crude to meet improving consumer demand for fuel, But spot crude purchases for the first quarter of 2022 could drop if Seoul reimposes COVID-19 restrictions for an extended period of time, the refining industry and trade participants said on Dec. 21.

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The world’s fifth-largest importer of crude received 10.836 million tonnes, or 79.43 million barrels of crude oil last month, up from 69.53 million barrels received a year earlier, according to the latest data from the Korea Customs Service.

Increase in shipments reflects increased operating and operating rates of major refiners to meet improving consumer fuel demand following Seoul’s decision to transition to life phase with COVID-19 from November 9.

Local condensate refiners and separators processed 83.858 million barrels of crude in November, up 6.8% from a year earlier.

In addition to growing consumer demand, improving cracking margins and high petroleum product prices, in line with high international crude prices, have also prompted increased turnover rates and fuel production, said a head of the Korea Petroleum Association based in Seoul.

Short-term demand risk

Looking to the future, however, South Korean refiners are planning to reduce their throughput levels slightly and they were expected to reduce their purchases of crude in the spot market in the near term, as Seoul gradually unwinds some of its “life with” policies. COVID-19 ”due to the resurgence of the spread of the pandemic, according to plant operations officials at two major South Korean refiners.

The number of daily infection cases in South Korea has climbed to more than 7,000 since early December, from less than 2,000 in October, to a new all-time high of 7,850 on December 15, according to the Korea Agency. disease control and prevention.

The death toll jumped by 94 on December 14, the biggest increase since the COVID-19 outbreak in January of last year.

In the face of the worsening crisis, the government has tightened social distancing rules and reimposed mobility restrictions, focusing on the densely populated area of ​​the capital Seoul, the KDCA said.

Major refiners and petrochemicals manufacturers, including Hanwha Total, SK Innovation and Hyundai Oilbank, have indicated that their 2022 crude oil futures supply agreements with producers both inside and outside OPEC were mostly concluded, and forward supply needs were carefully analyzed prior to negotiations.

With fixed monthly forward supply volumes, refiners have noted that spot purchases, which typically represent around 20-35% of their monthly raw material purchases, are expected to be reduced if consumer demand both nationally and nationally. foreigners in export destinations are weakening sharply in a context of resurgence. in the spread of COVID-19.

Expensive Middle East, Attractive United States

Customs data showed South Korea’s consumption of U.S. crude jumped 66.5 percent year-on-year to 10.89 million barrels in November.

The latest shipments from North America marked the eighth consecutive month of year-over-year increases, largely due to competitive prices for American grades amid high official selling prices for Middle crude. -East.

Many of the major Middle Eastern sour crude producers have increased their January PSOs for shipments to Asia despite concerns about the impact of the omicron variant on global oil demand.

Saudi Aramco increased its Asia OSP for average Arab crude for loading in January by 70 cents / bbl, from its December price to a premium of $ 3.05 / bbl over the Oman / Dubai monthly average , while the Iraqi National Petroleum Marketing Organization has set its January PSO for Basra. Average crude at $ 1.40 / bbl in Oman / Dubai, up $ 0.50 / bbl compared to December.

“It was rather fortunate to consider that OPEC + decided to continue increasing supply by 400,000 bpd in January despite the risk of renewed demand, but PSOs are kept at a very high level and supplies out. OPEC seem a lot more competitive these days, “said an official in sour crude trading at a major South Korean refiner.

South Korean refiners paid an average of $ 69.26 / bbl for Saudi crude shipments from January to October and $ 69.49 for Kuwaiti crude during the same period, according to the latest data from Korea National Oil Corp. . $ 68.39 / b over the same period.

KNOC will release detailed oil trade data for November in the week of December 26.

SOUTH KOREA CRUDE IMPORTS (Unit: ‘000 barrels)

Source: Korea Customs Service, Korea National Oil Corp.

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