South Korean oil demand stemmed its declines in April, falling by just 19 thousand b/d y/y, as weakness in the petrochemical complex was partially offset by a pick-up in manufacturing activity that boosted diesel demand. As expected, naphtha led the declines, lower by 99 thousand b/d y/y, due to a heavy round of cracker maintenance that saw 0.16 Mtpy of ethylene capacity go offline. LPG demand rebounded, up by 23 thousand b/d y/y, driven by gains in propane (+51 thousand b/d y/y). With heavy maintenance continuing in May, we expect demand for naphtha to fall further, as most Korean crackers maximise throughput of the feedstock. With the Nikkei South Korean Manufacturing PMI rebounding to 50.2 in April, the first expansion in factory activity since October 2018, diesel demand increased by 44 thousand b/d y/y. Gasoline demand was also higher, by 21 thousand b/d y/y.
Refinery runs increased by 0.21 mb/d y/y in April, to 3.13 mb/d, but weak margins have anecdotally led to run cuts of around 5% in May. April crude imports rose y/y by 0.29 mb/d to 3.2 mb/d, pushed higher by a significant increase in volumes from the US (+0.4 mb/d y/y) and the Middle East (+0.19 mb/d y/y). South Korea continued to receive Iranian volumes in April, with imports from Iran rising by 82 thousand b/d y/y to 0.42 mb/d, as buyers (particularly Hanwha Total) maximised South Pars condensate imports before the May expiry of sanctions waivers. Product imports fell by 19 thousand b/d y/y to 0.87 mb/d, with lower fuel oil imports (-84 thousand b/d y/y) offset by higher naphtha (+53 thousand b/d y/y) volumes. Product inventories saw a small 0.1 mb m/m rise to reach 58.8 mb in April, with a 1.9 mb naphtha build offset by diesel (0.9 mb) and gasoline (0.7 mb) draws. Crude stocks built by 1.7 mb on higher imports.