Q3 US crude imports seen dropping at least 50% on year
WTI crude commands premium over Middle Eastern grades
China poised to overtake S Korea as Asia's top US crude customer
Singapore — South Korea is rapidly losing its appetite for US crude oil with Asia's top North American oil customer expected to cut WTI and Eagle Ford imports by at least 50% in the third-quarter amid faltering domestic gasoline and jet fuel consumption, while WTI remains relatively expensive.
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Register NowSouth Korea's crude oil imports from the US in July dropped 66.7% from a year earlier to 4.92 million barrels, marking the biggest decline since the country began North American crude purchases in 2015, according to latest customs data.
Asia's fourth biggest oil consumer is poised to slash its US crude oil and condensate imports in Q3 to around 18 million barrels, down 53.2% from 38.44 million barrels received in the same 2019 period, and down 34% from 27.27 million barrels imported in Q2, according to feedstock trading sources at major South Korean refiners SK Innovation, GS Caltex and Hyundai Oilbank surveyed by S&P Global Platts.
Majority of US crude that South Korean refiners purchase consist of light sweet grades including WTI and Eagle Ford, but these companies are 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.
Due to the limited international air passenger traffic amid ongoing efforts to contain the spread of COVID-19, South Korea's jet fuel consumption fell to 4.26 million barrels in Q2, down 57.1% from the same period a year earlier and down 42.1% from Q1, latest data from state-run Korea National Oil Corp. showed.
In addition, recent heavy rains and flash floods across various regions in South Korea have put the brakes on the country's auto fuel demand recovery since the peak of the COVID-19 cases in March-April.
Refinery and industry officials expect domestic gasoline consumption to fall at least 12% from Q2 and on the year to around 18.5 million barrels, Platts reported previously.
South Korea's overall crude imports are unlikely to stage any meaningful rebound in the months to come, given the country's sluggish consumer and industrial demand for refined oil products, as well as declining fuel exports due to the slowdown in regional economic activity, industry and refinery officials based in Seoul said.
The world's fifth-biggest crude buyer imported a total of 84.84 million barrels of crude oil in July, down 1.7% from 86.34 million barrels a year ago, the customs data showed.
It marked the eleventh consecutive decline since September 2019. For the first seven months of 2020, the country's crude imports fell 7.7% year on year to 582.15 million barrels.
WTI REMAINS EXPENSIVE
South Korean refiners said they still do not find WTI, Bakken and Eagle Ford grades attractive and competitive, the trading managers surveyed by Platts said.
The spread between WTI Magellan East Houston, or MEH, on a CFR North Asia basis and Abu Dhabi's Murban on an Asia delivered basis has averaged $1.21/b to-date in Q3, $2.41/b in Q2 and 54 cents/b in Q1, Platts data showed.
The US flagship light sweet crude also remains relatively more expensive than several medium and heavy sour Middle Eastern grades as well for Asian buyers.
The spread between WTI Midland and Iraq's Basrah Light on an Asia-delivered basis has averaged 52.1 cents/b to-date in Q3.
TOP ASIAN CUSTOMER
South Korea's tepid US crude demand could mean that it could surrender the top Asian US crude buyer status in the second half of 2020, as China is poised to receive at least 40 million barrels over the period, with Beijing stepping up efforts to comply with the Phase 1 trade deal it struck in January with Washington.
August is on track to have the largest volume of US crude delivered to China in a given month, expected to cross 30 million barrels, Platts reported previously.
At least seven China-bound cargoes, carrying around 14 million barrels of crude, have been scheduled for September loading in the US Gulf Coast in recent days with China as their destination, S&P Global Platts fixtures data showed. These will arrive through October-November.
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August 25, 2020 at 08:33AM
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S Korea shuns US crude amid tepid fuel demand; WTI still expensive - S&P Global
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