In Freight News 16/06/2015
South Korea, which accounts for more than 10 percent of Asian oil demand, imported the most crude in 14 years and a record amount from Saudi Arabia last month in further affirmation for the OPEC producer’s market strategy.
Overseas purchases rose to 12.92 million metric tons last month, the highest level since February 2001, according to data released by the Korea Customs Service on Monday. The Asian nation shipped 4.73 million from Saudi Arabia, the most in data compiled by the agency since 2000.
South Korea is among major Asian crude-consuming nations that are stepping up purchases as a market glut yields more bargains for supplies from Latin America to the U.S. and West Africa to Europe. As competition increases, Saudi Arabia is seeking to defend market share by pumping at the fastest pace in more than three decades and leading OPEC’s policy of not cutting output.
“The Saudis have said that they want to fight for market share and South Korea is certainly a key market for them,” Victor Shum, vice president at IHS Inc., an Englewood, Colorado-based industry consultant, said by phone from Singapore. “They indeed have continued to send a lot of crude to Asia and more importantly, refiners are interested in taking up higher volumes.”
While benchmark Brent crude has rallied about 41 percent from a six-year low in January after slumping by almost half in 2014, the recovery has faltered near $65 a barrel amid speculation that higher prices will encourage drilling. The Organization of Petroleum Exporting Countries decided at a June 5 meeting to maintain its output target at 30 million barrels a day, aimed at forcing other producers including U.S. shale companies to slow drilling activity.
‘Substantially Improved’
Brent, the benchmark for more than half the world’s oil, fell 0.1 percent to $63.80 a barrel in London at 4:06 p.m. Seoul time. West Texas Intermediate crude, the U.S. marker, traded 0.1 percent lower at $59.90.
South Korea, which imports more than 80 percent of its crude from the Middle East, almost doubled its May purchases of Iranian crude to 541,510 tons from a year ago, the customs data show. Oil imports from the United Arab Emirates fell 33.6 percent to 916,544 tons, while shipments from Kuwait dropped 16.3 percent.
Oil demand in South Korea is forecast at 2.42 million barrels a day in 2015, compared with Asia’s 23.31 million, according to the Paris-based International Energy Agency. Global consumption is predicted to be 93.97 million for the year.
“Refiners are increasing their operating rates as margins have been improving,” Lee Chung Jai, an analyst at KTB Investment & Securities Co. in Seoul, said by phone.
Spot Crude
Refining margins have “substantially improved” in the first quarter of 2015 due to low oil prices and rising demand in India and China, SK Innovation Co., South Korea’s biggest refiner, said in an earnings statement April 30.
South Korean processors’ refining margins have risen to about $7 a barrel this year from about $3 in 2014, according to KTB’s Lee.
As the market glut swells, refiners including SK Innovation are increasing spotpurchases of crude. The company plans to buy as much as 6 million barrels of the U.K.’s Forties crude this year and more than double the imports of U.S. condensate to about 900,000 barrels in 2015 from last year.
Saudi Arabia, the world’s biggest oil exporter, produced 10.33 million barrels a day of crude in May, an increase of 25,000 barrels from April, according to data the country communicated to OPEC. The nation sold March supplies of its Arab Light grade to Asia at the biggest discount in at least 14 years.
The Middle East producer is also finding buyers in other Asian nations. China, the world’s second-biggest oil consumer, is forecast to boost crude imports this month after purchases in May slowed from a record. The country bought 5.26 million tons of Saudi crude in April, versus 3.84 million a year earlier, according to data from the Beijing-based General Administration of Customs on May 22.
