South Korean oil demand fell y/y for the fifth straight month in November, by 0.15 mb/d to 2.53 mb/d. The weakness was led by a substantial 0.12 mb/d fall in naphtha to 1.17 mb/d as cracker maintenance continued to weigh on demand, while propane demand only rose by 13 thousand b/d y/y to 0.17 mb/d. Fuel oil demand fell y/y by 20 thousand b/d to 73 thousand b/d as a warm start to the winter weighed on utility demand. Gasoline demand rose by 12 thousand b/d to 0.23 mb/d, recovering by 51 thousand b/d from October’s seven-and-a-half-year low, as a material downward correction in crude oil prices and recent retail fuel tax cuts boosted demand growth. Further cuts have been announced for 2019 in an effort to stimulate the economy, with the import tax on naphtha-rich light crudes reduced to 0.5% from 3.0% and the import levy on naphtha raised to 0.5% from 0%. South Korea’s economy is slumping, with GDP rising by just 2% y/y in Q3 18, the weakest gain in nine years. Still, diesel demand hit a 23-month high, rising by 8 thousand b/d y/y to 0.50 mb/d, likely due to increased demand for MGO as a bunkering fuel, although the strength may not continue. Jet demand fell y/y by 6 thousand b/d to 0.10 mb/d.
Refinery runs fell y/y in November by 0.13 mb/d to 3.06 mb/d. Still, with weak demand, product exports grew by 3 thousand b/d y/y to 1.48 mb/d, limited by an 85 thousand b/d reduction in jet exports. Crude oil imports from Iran remained at zero throughout November. Instead, Korea raised imports from the UAE (+64 thousand b/d m/m to 0.23 mb/d) and Qatar (+0.14 mb/d m/m to 0.18 mb/d), the latter likely included condensates to replace lost South Pars condensate. Crude stocks grew m/m by 3.4 mb (+9.6 mb y/y) to 52.1 mb, while product inventories rose by 4.3 mb (+7.7 mb y/y) to 62.9 mb, led by rising jet and naphtha stocks.