Korean oil demand declined y/y for the second time this year, by 55 thousand b/d to 2.51 mb/d, largely due to a sharp upward revision to the 2017 July figures, which now show a m/m increase in demand. Still, the economy slowed, with job growth slowing to a nine-year low during the month, weighing on demand. Demand fell across the board except for LPG, which grew by 5 thousand b/d y/y. Naphtha demand fell by 26 thousand b/d y/y due to a high base, but outright demand of 1.23 mb/d was similar to the Q2 18 level. Gasoline and jet demand slipped by 2 thousand b/d and 5 thousand b/d respectively, with the latter falling y/y for the first time in five months. Diesel demand fell by 9 thousand b/d y/y, in line with the manufacturing PMI slipping to a 20-month low of 48.3. Fuel oil demand was down y/y by 13 thousand b/d.
Refinery runs grew m/m by 0.12 mb/d, in line with better margins, to 3.13 mb/d (+7 thousand b/d y/y) which took utilisation above 100%. Crude imports rose by 0.1 mb/d y/y led by Kazakhstan (+0.21 mb/d) and the US (+0.17 mb/d), offsetting lower imports from Iran (-0.17 mb/d) and Saudi Arabia (-94 thousand b/d). Net product exports fell by 90 thousand b/d y/y to 0.50 mb/d due to higher imports of naphtha (+90 thousand b/d) and lower exports of jet (-74 thousand b/d) and gasoline (-30 thousand b/d). Net imports of fuel oil fell by 63 thousand b/d y/y to just 1 thousand b/d with S-Oil reportedly exporting surplus fuel oil with their new 76 thousand b/d RFCC facing difficulty meeting gasoline specifications. Refineries raised gasoline (+0.3 ppts y/y) and diesel yields (+1 ppts y/y) at the expense of jet (-0.1 ppts y/y). Crude stocks fell m/m by 0.5 mb and have fallen sharply in August so far based on satellite imagery while product stocks built by 2.7 mb, mainly on a 3.1 mb build in jet.