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South Korea to release 3.17 million barrels of SPR from January

South Korea will release 3.17 million barrels from its strategic petroleum reserves from next month, joining the US-led drive to bring down international crude oil prices and tame consumer inflation, the energy ministry said Dec. 23.

2.08 million barrels of crude oil and 1.09 million barrels of refined products will be released for three months from January next year, the Ministry of Trade, Industry and Energy said in a statement.

The crude reserve will be given to local refiners in a form of a one-year lending, while oil products — kerosene and propane — will be sold via auction, it said.

“This is also a preemptive measure to meet any possible supply disruptions in the winter period when heating demand of kerosene and propane goes up,” Vice MOTIE Minister Park Ki-young said in the statement.

“The government decided the volume after discussions with local refiners and consulting with the US,” the ministry statement said.

The release volume of 3.17 million barrels accounts for 3.3% of the country’s total strategic reserves of 9.7 million barrels –- 83 million barrels of crude and 14 million barrels of oil products, which is 106 days’ worth as recommended by the International Energy Agency.

“After this round of release, the country would still hold 93.83 million barrels in strategic reserves, or 103 days’ worth, which are enough to cope with any disruption crisis,” the statement said.

The round of release of strategic petroleum reserve is smaller than 3.467 million barrels South Korea released in 2011 for the Libyan crisis, or 4% of the country’s then strategic reserves.

Tiny volume
Crude traders and analysts across the region indicated that Asia’s top four oil consuming nations appear little interested in fully committing to Washington’s idea of releasing SPRs to bring prices down.

In November, India agreed to release 5 million barrels of crude oil from its SPR, while Japan’s Minister of Economy, Trade and Industry Koichi Hagiuda had hinted around “a couple of hundred thousand kiloliters,” could be released.

“You simply look at the volume of these SPR releases, it’s a joke! Tiny volumes like this will even struggle to move daily spot market price differentials,” said a sour crude trader based in Singapore with close knowledge of spot Middle Eastern crude flows to Northeast Asia.

Major refiners across Asia including SK Innovation, Cosmo Oil, ENEOS, PTT, BPCL indicated that the true purpose of the SPR is for critical events such as drastic supply disruptions due to major geopolitical events like war, not for commercial reasons like high prices.

Authorities in South Korea and Japan are seeking to implement more constructive ways to tackle the rising consumer inflation and help ease the burden on consumers struggling with high retail fuel prices.

South Korea’s Ministry of Economy and Finance decided to lower taxes on auto fuels by as much as 20% for six months from November, as part of efforts to ease rise in pump prices.

In Japan, the Ministry of Economy, Trade and Industry decided to provide subsidies to curb increases in retail prices of gasoline, kerosene, gasoil and fuel oil from the end of December to end of March in an effort to aid domestic transportation fuel consumers.
Source: Platts

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