South Korean oil product demand fell y/y for the third straight month, by 19 thousand b/d to 2.56 mb/d as rising global crude oil prices, economic slowdown, and a rising unemployment rate are weighing on product consumption. According to the Bank of Korea, the country’s import price index jumped by 1.5 ppts m/m in September driven by strong crude and other commodity prices (+6.0 ppts m/m, +36.8% y/y). Gasoline demand was flat y/y at 0.23 mb/d. To stimulate domestic gasoline demand, the South Korean government is considering a 10% gasoline tax break at retail outlets from early November, which would obviously boost demand if implemented. Naphtha demand rose y/y by 37 thousand b/d to 1.28 mb/d, while propane demand fell by 5 thousand b/d y/y. Planned cracker maintenance between September and November is materially higher y/y (0.12 Mt of daily ethylene capacity), which will keep propane (and naphtha) demand in check, although the loss of Iranian South Pars condensate is providing support to naphtha demand. Diesel was the main drag on demand, falling y/y by 41 thousand b/d, as government and private-sector investment has weakened in recent months.
Refinery runs rose y/y in September by 9 thousand b/d to 2.96 mb/d mb/d. Product exports fell by 32 thousand b/d y/y, led by jet, but the decline was limited by an 83 thousand b/d y/y increase in diesel exports. Crude stocks fell m/m by 7.8 mb (-0.25 mb lower y/y), but satellite data show stocks have built in October. September product stocks built by 2.02 mb, driven by diesel. Crude oil imports from Iran fell to zero ahead of the 4 November sanctions deadline. Instead, Korea raised imports from Kuwait (+79 thousand b/d m/m) and Qatar (+0.15 mb/d m/m), the latter likely included condensates to replace lost South Pars condensate barrels.