South Korean refiners optimistic about refining margins, secure ample Saudi crude in January: S&P GCI

New Delhi [India], February 19 : South Korea experienced an 8.6 per cent surge in crude oil imports compared to the previous year, indicating a gradual increase in run rates by refiners who anticipate an improvement in margins, in January.
According to S&P Global Commodity Insights (GCI), despite Saudi Arabia's commitment to production cuts in the first quarter, feedstock managers ensured a steady flow of Saudi barrels, reflecting confidence in the market's resilience.
The latest data from Korea Customs Service revealed that South Korea, the world's fourth-largest crude importer, received 88.63 million barrels, or 2.86 million b/d, of crude oil last month, marking the fifth consecutive month of year-on-year increase.
Major local refiners and market analysts expressed cautious optimism regarding near-term refining and oil product export margins.
The anticipation stems from China's economic stimulus measures and increased travel demand during the Lunar New Year holiday period, which are expected to boost regional refining margins, especially for jet fuel and diesel, according to an official at SK Innovation, the country's top refinery.
While South Korea and Northeast Asia may witness tepid oil demand from the industrial sector due to subdued construction and manufacturing activities, the robust economic growth in India and upbeat tourism across Asia are projected to support regional oil demand and margins.
Analysts from Meritz Securities and the Industrial Bank of Korea emphasised the positive outlook for regional refining margins in 2024, citing steady transport fuel demand growth and low inventory levels.
Reflecting the improving refining landscape, South Korean refiners processed 90.42 million barrels, or 2.92 million b/d, in December 2023, marking the third consecutive month of year-on-year increase.
This gradual recovery in crude processing indicates a positive trend, with crude stockpiles falling 8.9 per cent year-on-year to 37.89 million barrels as of end-December.
Despite OPEC's voluntary production cuts of 2.2 million b/d, South Korea witnessed a 6.6 per cent increase in crude imports from its top supplier, Saudi Arabia, in January.
With the Joint Ministerial Monitoring Committee yet to confirm whether the production cuts will be extended beyond April, traders and feedstock managers remain optimistic about the availability of Middle Eastern sour crude to meet Asian demand in 2024.
Furthermore, South Korea continued its active purchases of US crude, acquiring 13.49 million barrels in January.
The relatively unaffected delivery costs from the US Gulf Coast to Asia, compared to the escalating logistical costs from the Persian Gulf, have made US crude an attractive option for South Korean refiners.
As the industry awaits detailed oil trade data for January from Korea National Oil Corporation (KNOC), including shipments from other major crude suppliers and import costs, market sentiment remains cautiously optimistic, buoyed by expectations of improving refining margins and ample crude availability in the Asian market.