South Korea halts Kazakh CPC Blend crude imports

South Korea halts Kazakh CPC Blend crude imports South Korea halted purchasing Kazakhstan's CPC Blend crude with Asia's third biggest crude importer taking zero cargo from the central Asian producer in February, as major local refiners find logistics for the light sweet crude procurement too costly and
Energy
March 28, 2024 14:06
 South Korea halts Kazakh CPC Blend crude imports

South Korea halted purchasing Kazakhstan's CPC Blend crude with Asia's third biggest crude importer taking zero cargo from the central Asian producer in February, as major local refiners find logistics for the light sweet crude procurement too costly and ineffective amid ongoing Red Sea marine safety jitters, industry sources said.

Report informs via S&P Global Commodity Insights that South Korea has been a regular customer of Kazakhstan's CPC Blend crude as refiners were broadly fond of the light sweet crude which has high middle-distillate yields, taking on average around 3-5 million barrels/month over the past decade.

However, zero shipments in February marked the first time South Korea failed to take the light sweet crude since October 2020, latest data from state-run Korea National Oil Corp. showed.

Logistics for bringing in CPC Blend have become highly complicated as there are significantly less vessels willing to travel the Red Sea area, while delivery costs are still trending higher due to rising insurance premiums, feedstock managers at two major South Korean refiners told S&P Global Commodity Insights.

CPC Blend crude first gets delivered from production facilities to the Russian Black Sea port of Novorossiisk via the Tengiz-Black Sea pipeline before sailing through the Suez Canal to reach South Korean ports.

Since late 2023, CPC Blend crude cargoes for South Korea have detoured the Suez Canal to take the longer Cape of Good Hope route, according to refinery sources with direct knowledge of the matter.

"It has become way too troublesome and costly to import CPC Blend crude and refining economics are not exactly [ for cracking the light sweet Kazakh crude] ideal," a linear programming model analyst at a South Korean refiner said.

South Korea's top refiner SK Innovation and its shipping subsidiary SK Shipping had indicated the sharp increase in logistical costs for Kazakh CPC Blend crude shipments is a big concern and they would closely monitor the uptrend in shipping insurance war risk premium to assess refining economics for cracking CPC Blend crude going forward.

South Korea may still receive a few cargoes in the coming months as there are few delays in arrival with the tankers taking the longer Cape of Good Hope path. However, refiners are expected to significantly cut down CPC Blend crude purchases going forward, according to analysts at Korea Petroleum Association based in Seoul.

As part of effort to fill the light sweet Kazakh crude supply gap, South Korea continued to actively purchase US crude in February.

South Korea took 13.63 million barrels of mostly light sweet crude including WTI Midland from the US in February, up 22.1% from a year earlier, KNOC data showed.

For the first two months, US crude shipments rose 8.6% on the year to 27.841 million barrels.

Compared to Persian-Gulf to Far East Asia tanker availability, USGC-Asia is less complicated in terms of logistics as there are plentiful VLCCs willing to carry WTI Midland crude to Northeast Asian buyers, feedstock managers at major South Korean refiners said.

"Shipping insurance is reasonably fair for USGC-Asia delivery... risk premiums for Persian Gulf-Asia tankers are very high," a trading source at a South Korean refiner said.

Meanwhile, South Korea's crude imports from its top crude supplier Saudi Arabia fell 9.2% on the year to 25.39 million in February, KNOC data showed.

Shipments from Kuwait rose 13.2% on the year to 10.873 million barrels in February, while imports from the UAE, mostly light sour Murban and medium sour Upper Zakum crude, rose 1.4% on the year to 11.11 million barrels last month, KNOC data showed.

In the ultra-light crude segment, South Korean refiners and petrochemical makers favored Australian condensate over Qatari grades as logistics also favored shipments from Oceania, feedstock management sources and traders said.

"In times of high freight rates and high insurance premiums, the closer the supply source the better of course," said a feedstock manager at a South Korean petrochemical company.

South Korea's ultra-light crude imports from Australia, mostly Wheatstone condensate and North West Shelf condensate surged 65% year on year to 3.25 million barrels in February, marking the biggest monthly shipments from the Oceania supplier in 18 months, KNOC data showed.

Crude and condensate imports from Qatar, including Deodorized field condensate and Qatar Low sulfur condensate, dropped 33.1% year on year to 4.136 million barrels last month.

In total, the world's fourth-biggest crude buyer imported 89.03 million barrels, or 3.07 million b/d, of crude in February, up 2.1% from a year earlier.

Latest news

Orphus sistemi