US-Korea October crude flows to hit new high

US oil exports to South Korea are poised to rise nearly ninefold year-on-year to a record high in October.

At least 13mn bl, or nearly 420,000 b/d, of US crude has been booked to leave the US Gulf coast for South Korea in October, according to shipping fixture reports compiled by Argus . That would reflect a roughly 57.3pc increase compared to preliminary September volumes of roughly 265,000 b/d and more than eight times the 49,000 b/d shipped from the US to South Korea in October 2017.

US crude exports to South Korea have been trending upward since early 2018 on widening spread between West Texas Intermediate (WTI) and the Asian oil benchmark Dubai, which reflects an improving arbitrage for US crudes to the region compared to similar grades. WTI averaged a $6.74/bl discount to Dubai during the October US trade month, which ended yesterday, compared to an average $4.26/bl discount the month prior.

The trend has been encouraged by a South Korean subsidy on oil imports from regions other than the Mideast Gulf, in which state-owned KNOC refunds a $2.26/bl tariff to refiners that import from non-Mideast suppliers.

The goal of the tax incentive has essentially been achieved, as South Korean importers cut their reliance on Middle East oil to less than 77pc of all supplies in January-June this year from 85pc in the first half of 2017, according to KNOC data.

But South Korea's government is now considering the elimination of this credit, potentially weighing on future crude flows from the US.

Planned US cargoes to South Korea 000 bl Load date Tanker name Charterer Approx. volume 1-Oct-18 British Vantage GS Caltex 2,000 5-Oct-18 Cosflying Lake GS Caltex 2,000 10-Oct-18 Maran Athena SK Energy 2,000 11-Oct-18 Lawhah GS Caltex 1,000 18-Oct-18 New Triumph SK Energy 2,000 24-Oct-18 Awtad Lord Energy 2,000 24-Oct-18 Maran Carina Lord Energy 2,000 Shipping fixture reports

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