Korean oil demand fell y/y for the second consecutive month, by 19 thousand b/d to 2.50 mb/d, as a slowdown in economic growth is starting to weigh on oil consumption. Industrial production growth peaked in Q3 17 and has struggled for annual gains this year. The August manufacturing PMI of 49.9 was the sixth consecutive sub-50 reading. Similar trends are showing up in oil demand, particularly for naphtha where demand appears to have peaked in 2017. Naphtha demand was down y/y for the second consecutive month by 24 thousand b/d despite higher demand from petrochemical plants to replace lost South Pars condensate barrels. Heavy cracker maintenance is scheduled over October and November, so we expect naphtha demand to struggle to grow even with naphtha cracking turning more competitive than LPG since late-August. Diesel demand surprisingly grew by 19 thousand b/d y/y, while gasoline (+5 thousand b/d y/y) and jet (-4 thousand b/d y/y) demand were mixed. LPG demand fell for the first time in seven months, by 3 thousand b/d y/y while fuel oil demand grew by 2 thousand b/d y/y.
Refinery runs fell y/y by 0.14 mb/d to 2.95 mb/d. Crude imports fell by 0.21 mb/d y/y led by Iran (-0.34 mb/d), offsetting higher imports from Africa (+0.17 mb/d). Net product exports grew y/y by 97 thousand b/d to 0.68 mb/d due to higher exports of jet (+80 thousand b/d) and gasoline (+78 thousand b/d) offsetting higher imports of naphtha (+90 thousand). Refineries raised gasoline yields by 0.9 ppts y/y which likely reflected the restart of S-Oil’s new 76 thousand b/d RFCC in mid-August. Crude stocks rose m/m by 3.6 mb while product stocks drew by 6.2 mb, mainly on a 3.1 mb draw in jet.