Seoul - South Korea is on track to overtake Canada as the top buyer of U.S. crude oil in 2020 as a mix of steep price discounts to alternative supplies, attractive refining economics and rebates on shipping charges prove too good to resist for big refiners.
South Korean purchases more than doubled in the first 11 months of 2019 from a year earlier to 142.3 million barrels, Energy Information Agency (EIA) data showed. That was by far the fastest growth rate among top destinations for U.S. crude, and placed South Korea less than 10 million barrels behind top market Canada.
With the United States set to become a net exporter of crude for the first time in 2020, Asia is expected to be a focus for more shipments, especially as European refiners have limited capacity for more shale.
Historically attractive pricing has been a key driver behind U.S. export momentum.
South Korea, the world’s fifth-biggest oil importer, bought more than 375,000 barrels per day (bpd) of U.S. oil in 2019, taking its share of Korean imports to nearly 13%. Buyers paid on average $1.70 a barrel less than for crude from top supplier, Saudi Arabia, according to Reuters calculations based on state-run Korea National Oil Corp (KNOC) data.
This compares with a 97 cents a barrel premium in 2018.
“It is economically more attractive, and trade companies, midstream (firms) and producers have been aggressive seeking out buyers for American crude in Asia,” said Stephen Wolfe, a Houston-based oil analyst at Energy Aspects.
“Light sweet (crude) is attractive in Korea as a substitute for Iranian South Pars, especially in petrochemically-integrated plants, and especially after the implementation of IMO 2020 (ship fuel rules).”