South Korean oil demand rose y/y by 0.16 mb/d to a record high of 2.63 mb/d in November. Petrochemicals accounted for more than 80% of demand growth, split equally between naphtha and LPG at about 63 thousand b/d each. LPG demand will remain supported by new LPG cracking capacity coming online, with Lotte Chemical planning to expand its Yeosu plant by 2018 and crack propane. Gasoline and diesel demand resumed y/y growth at 6 thousand b/d and 33 thousand b/d y/y respectively, following a brief dip in October. Jet demand grew for the 11th straight month, up by 5 thousand b/d. Even though HDDs were a massive 26% higher y/y, fuel oil demand fell y/y for the first time in 16 months, by 34 thousand b/d, due to a high base. The return of nuclear capacity from maintenance (offline nuclear capacity had dropped to 30% by mid-December) and the start-up of the new 1.4 GW Shin-Kori 3 (end-December) and 1.4 GW Shin-Kori 4 (Q1 17) nuclear reactors will weigh on fuel oil demand in the utility sector next year.
Refinery runs rose by 0.25 mb/d y/y to 2.97 mb/d—the second highest level on record—in line with solid export margins. Crude imports grew more impressively, by 0.33 mb/d, resulting in crude inventories rising m/m by 1.7 mb. The rise in crude imports was mainly from Iran, up by a massive 0.38 mb/d y/y to a record 0.47 mb/d, supported by condensate demand from a new condensate splitter start-up. Both gasoline and diesel yields fell to the lowest since 2010 while fuel oil yields rose to the highest in over three years, at 8.1% of refining throughput. Net export of gasoline stayed at multi-month low of 0.16 mb/d while net import of propane hit a new record of 0.2 mb/d causing propane inventories to swell close to the record high of October 2015.