Tanker Market: South Korea’s Overall Oil Demand Hits Four-Month High in July
South Korea’s overall petroleum product demand in July surged by 2.8% m-o-m and 8.3% y-o-y to a four-month high of 2.56 mmb/d. The y-o-y growth in demand was largely led by a jump in naphtha (+12.5%), diesel (+17.3%) and gasoline (+8.9%), outweighing a dip in LPG (-4.9%) and fuel oil (-24.6%). Naphtha consumption in South Korea rose by 12.5% y-o-y, hitting 1.26 mmb/d in July. Firm LPG prices and a subsequently narrow propanenaphtha spread underpinned robust demand for naphtha as a petchem feedstock.
In line with the growth in naphtha demand, LPG consumption declined by 4.9% y-o-y to 283 kb/d. Low pump prices supported South Korean gasoline and diesel demand in July, which expanded by 8.9% and 17.3% y-o-y to 230 kb/d and 474 kb/d respectively. Fuel oil consumption in South Korea remains in structural decline, down by 24.6% y-o-y to 93 kb/d in July despite peak power demand season as it continues to be backed out by alternative fuels for power generation. As such, South Korea’s fuel oil imports plunged by 46.8% y-o-y to a two-year low of 76.7 kb/d in July.
The recently elected President Moon Jae-in has led a shift in South Korea’s energy policy from coal and nuclear towards LNG and renewables for power generation. Reflecting the change in policy, South Korea’s LNG imports grew by a massive 41.6% y-o-y to 2.72 mmt in July. Elevated LNG demand is expected to continue to weigh on South Korea’s fuel oil consumption.
Source: OFE Insights