Following the near 3% y/y increase in July, South Korean oil demand increased by just 7 thousand b/d (0.3%) y/y in August to 2.2 mb/d. In Q3-to-date, South Korean oil demand is running higher y/y by 37 thousand b/d (1.7%), a marked slowdown compared to Q2, when y/y demand increased by a solid 191 thousand b/d (9.4%), largely down to extremely favourable base effects from 2011, when a retail price change had momentarily impacted demand.
Much like July, the strength in the data in August was concentrated in naphtha and fuel oil demand. With crackers around the country running at elevated utilisation rates, spot demand for naphtha remains high. Meanwhile, fuel oil demand was primarily boosted by above average temperatures, as usage for electricity generation stayed high, and demand is likely have continued this month, with the warm weather persisting. Gasoline and diesel demand, on the other hand, remained weak, falling y/y by 2.7% and 5.7% respectively. Refinery runs increased y/y by 7.4%, while product imports were up 5.4% y/y and products exports 1.7% higher.
South Korea's crude oil imports increased y/y by 248 thousand b/d (10.6%), although imports from Iran dropped to 0. Following negotiations between Hyundai and SK Energy and NITC, initiated by the latter's offer to provide up to $1 billion in insurance cover, imports of the usual 200 thousand b/d are set to have resumed this month. Both crude and products inventories increased over the month and together are slightly above the five-year average by 1.3 mb.