South Korea’s imports of U.S. crude oil are expected to hit all-time highs in September and October, as the world’s fifth-largest oil importer cuts off Iranian oil imports and looks for cheaper alternatives for other Middle Eastern crude grades, Reuters reported on Thursday, citing trade flow data and four sources familiar with the matter.
Since last month, U.S. crude oil loadings en route to South Korea have been rising, and are expected to hit a record-high of 6 million barrels in each of the months of September and October, according to Reuters’ sources and Thomson Reuters Eikon trade flow data.
In the first half of 2018, South Korea’s oil imports from the United States jumped by more than four times from the same period last year, to a total of 14.1 million barrels from January to June 2018, data from Korea National Oil Corp shows. This translates into an average monthly oil import rate of 2.35 million barrels of U.S. crude oil to South Korea, according to Reuters estimates.
South Korea has been a regular customer of U.S. crude since the U.S. restrictions on oil exports were lifted in 2015. During the last two months for which EIA data is available, U.S. exports to South Korea stood at 102,000 bpd in April, and rose to 113,000 bpd in May.
The two key reasons for rising South Korean imports this summer are the U.S. sanctions on Iran and the cheaper U.S. oil compared to Middle Eastern grades.
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Due to the sanctions on Tehran, South Korea suspended purchases of all Iranian oil last month, after having slashed its Iranian oil imports by 41 percent to 183,000 bpd in June compared to June last year.
South Korean refiners are also seeking cheaper alternatives to Iraq’s Basra Light for example, and the wider WTI-Dubai spread makes U.S. oil imports economically viable.
“The quality of Mars is better than Basra Light,” one of Reuters’ sources said, adding that the Mars sulfur content is slightly lower than for Basra Light, which makes it easier to process.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.