After a rare uptick in January, South Korean oil demand fell by 63 thousand b/d y/y to 2.61 mb/d in February. This was due to a weak macroeconomic backdrop amid the ongoing US-China trade war, causing Korean exports to fall by 10.8% y/y last month. The fall in trade, combined with mild winter weather, led to a 32 thousand b/d y/y fall in fuel oil demand to 76 thousand b/d. Further weakness came from naphtha, which fell by 31 thousand b/d y/y. Propane margins continued to outperform naphtha as the preferred petrochemical feedstock, although milder weather also pushed propane demand lower y/y by 16 thousand b/d to 0.19 mb/d. Automotive fuel demand continued to strengthen, however, as diesel demand grew y/y by 30 thousand b/d to 0.46 mb/d, and demand for gasoline rose y/y by 9 thousand b/d to 0.26 mb/d, supported by lower pump prices and the recent retail tax cuts.
Refinery runs grew by 80 thousand b/d y/y to 3.18 mb/d in February, hitting their highest level since January 2018 amid improving refining margins. Crude imports rose y/y by 0.14 mb/d to 3.52 mb/d as South Korea continued to receive Iranian South Pars condensate cargoes in February, although overall oil imports from Iran fell y/y by 23 thousand b/d to 0.31 mb/d. Crude oil imports from the US increased again—up y/y by a whopping 0.42 mb/d to a record high of 0.57 mb/d—as Korea became the biggest buyer of US crude. Meanwhile, product imports fell to their lowest since November 2017, by 0.24 mb/d y/y to 0.81 mb/d as refinery runs rose. Product inventories rose m/m by 0.8 mb to 57.2 mb, as builds were capped by a 1.0 mb m/m drawdown in naphtha stocks, while crude stocks rose m/m by 9.8 mb to 59.8 mb.