South Korea’s Oct crude imports from Iran remain at zero due to US sanctions

S&P Global Platts – South Korea imported no Iranian crude in October for a second straight month due to the re-imposition of US sanctions on Tehran, according to preliminary data released by the Korea Customs Service Thursday.

In September, South Korea’s imports of Iran oil fell to zero for the first time since September 2012 amid then US-led sanctions on Iran.

South Korea has sharply reduced imports of Iranian crude and condensate since May this year to brace for the re-imposition of the US sanctions. It received just 2 million barrels from Iran in August.

For the first ten months of this year, Iranian imports more than halved to 58.2 million barrels, compared with 128.79 million barrels a year ago.

South Korea was granted a temporary exemption for crude imports from Iran after agreeing to reduce its purchases “significantly,” just as US sanctions against Tehran came into force early this month.

The South Korean government refused to elaborate on the “significant volume,” but sources familiar with the matter have said that the country would be able to import 4 to 6 million barrels/month of Iranian crude, mostly condensate under the waiver.

South Korea imported an average of 12.32 million barrels/month of crude and condensate from Iran in 2017, according to data from state-run Korea National Oil Corp.

South Korea’s actual resumption of Iranian oil liftings could come from January onwards as it takes time to make various arrangements, including shipping.

SK Innovation, South Korea’s biggest buyer of Iranian crude, said it was preparing to resume imports of South Pars condensate from Iran for early January delivery.

The refiner has imported around 1 million barrels/month of South Pars condensate until July and 1 million to 2 million barrels/month of Forozarn crude from Iran until July.

Hanwha Total, Asia’s largest buyer of Iranian South Pars condensate, is also expected to resume shipments from Iran possibly from January.

Hyundai Oilbank, which had purchased South Pars condensate and other Iranian grades such as Iran Heavy and Forozan, has suspended Iranian crude imports since August.

To make up for the loss of Iranian barrels, South Korea’s crude imports from its biggest supplier, Saudi Arabia jumped 54.3% year on year to 4.17 million mt, or 30.56 million barrels, in October, from 19.81 million barrels a year earlier.

The October imports were also up 28.1% compared with 23.86 million barrels in September.

In total, South Korea imported 13.07 million mt (95.8 million barrels or 3.09 million b/d) of crude oil in October, up 3.2% from 92.84 million barrels a year earlier, as a result of receiving more cargoes from sources alternative to Iran.

The volume of 95.8 million barrels in October is more than the monthly average of 92.1 million barrels over the first nine months. The October imports were up 20.2% from September’s 79.7 million barrels.

The increase came after the country’s crude imports fell 14.4% year on year in September, which marked the largest decline in nearly nine years, due mainly to the loss of Iranian barrels.

As a result of the reduced crude imports for the past months, South Korea’s crude stockpiles fell 4.2% year on year to 47 million barrels in September, which marked the first decline in two years.

“The rise in crude imports in October seems driven by the decreased crude stockpiles,” an official at the Ministry of Trade, Industry and Energy said.

For January-October, the country’s crude oil imports edged up 0.1% year on year to 924.59 million barrels, compared with 923.65 million barrels in the previous year.

In 2017, the country imported a total 1.118 billion barrels of crude oil, up 3.7% from 1.078 billion barrels in 2016.

Final oil trade data for October will be released later this month by KNOC.