South Korean oil demand continued to fall in March, by 21 thousand b/d y/y to 2.5 mb/d, against a backdrop of trade war uncertainty and cooling global growth, which led manufacturing exports to fall by 8.2% y/y. Naphtha led the declines, dropping by 43 thousand b/d y/y due to a round of cracker maintenance that saw 50 Ktpy of ethylene capacity go offline. LPG demand followed a similar trend, falling by 16 thousand b/d y/y. We expect demand for petrochemical feedstocks to decrease further in April and May, as these are peak months for cracker maintenance (average of 0.15 Mtpy of ethylene capacity offline). Unusually warm weather dented fuel oil demand, leading to a 12 thousand b/d y/y decline. Transport fuels continued to strengthen as the government opted to extend cuts on retail fuel taxes, with diesel rising by 22 thousand b/d y/y and gasoline up by 18 thousand b/d y/y.
Refinery runs increased by 0.23 mb/d y/y in March, to 2.95 mb/d, with product prices supported by a series of refinery outages and the start of maintenance. Crude imports rose y/y by 0.14 mb/d to 2.8 mb/d, spurred by a marked increase from the US (+0.16 mb/d y/y) and Kuwait (+0.11 mb/d). South Korea continued to receive Iranian South Pars Condensate in March, although imports from Iran fell y/y by 40 thousand b/d to 0.33 mb/d. Given US waivers will no longer be renewed, Korea is expected to stop importing Iranian condensate, which means the likes of Hanwa Total will need to dip into the naphtha market for imports, supporting naphtha buying from June. Product imports fell by 0.13 mb/d y/y to 0.78 mb/d, led by fuel oil (-84 thousand b/d y/y) and naphtha (-42 thousand b/d y/y). Product inventories rose m/m by 1.6 mb to 58.7 mb, with diesel stocks rising by 3.3 mb, while crude stocks fell m/m by 6.6 mb to 53.2 mb.