U.S. Now South Korea's 4th largest Oil Supplier
SEOUL (Reuters) - Just three years after lifting a ban on crude exports, the United States has overtaken Iran and the United Arab Emirates to become South Korea's fourth-largest oil supplier, displacing mainly oil from the Middle East.
South Korea increased purchases of U.S. oil in the first half to replace Iranian condensate, an ultra light oil used as petrochemical feedstock, as well as some Middle East supplies that became more costly due to Iran sanctions and production quotas set by the Organization of Petroleum Exporting Countries.
And U.S. oil imports are set to rise further in coming months as Iranian oil remains out of bounds and new U.S. oil pipelines are set to boost exports from the world's largest producer, according to data and analysts.
"Importing U.S. crude oil has become more economically viable, helped by a wider discount ... as uncertainties in the Middle East have made Middle East crude oil more expensive," said Kim Jae-kyung, a research fellow at Korea Energy Economic Institute.
"In the second half, this trend could continue or grow."
South Korea imported a record 60.23 million barrels, or 332,751 barrels per day (bpd), of U.S. crude in the first six months of 2019. The country was the largest customer for U.S. oil in June, according to data from Korea National Oil Corp (KNOC) and the U.S. Census Bureau.
Overall, U.S. oil shipments made up 11.1% of the country's total crude imports, up from 2.5% a year earlier, and pushed the share of Middle East producers to 72.8%, the lowest since 1999, according to Reuters calculations based on KNOC data.
U.S. sour crude Mars accounted for about half of all volumes in the first half, while light sweet grades such as West Texas Intermediate and condensate made up most of the remainder, KNOC's data showed.
Total imports of U.S. oil in the third quarter are expected at about 42.2 million barrels, according to Reuters calculations based on Refintiv Eikon data that tracks trade flows. This is equivalent to 458,024 bpd, up more than a third from the first half.
For South Korea, the cost of importing Middle East crude was on average 41 cents a barrel more expensive than U.S. crude in the first half this year, KNOC's data showed. The price gap was widest in April at $3.80 a barrel.
This partly reflects the increased cost of shipping Middle East oil, which has risen after insurance companies increased risk premiums for the region on rising tensions.
South Korea's U.S. oil imports will stay firm for the rest of the year due to the Iran sanctions and demand for sweet crude to meet new ship fuel standards from 2020, said Virendra Chauhan, a Singapore-based oil analyst at Energy Aspects.
"Given that Iranian supplies are unlikely to recover, imports from the U.S., particularly of West Texas Light are likely to increase," Chauhan said.
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