South Korea's Vice Minister of Trade, Industry and Energy, Yang Ghi-wuk, stated on Thursday that the government is considering an extension of its crude oil swap arrangement with private companies until July. This consideration is due to sustained demand from businesses, as the mechanism was initially implemented to stabilize domestic fuel supplies.
The remarks were made during a routine briefing on energy supply, which focused on South Korea's energy situation amidst the ongoing Middle East crisis.
"We have decided to extend the strategic petroleum reserve swap mechanism until June and are reviewing whether to prolong it further into July," Yang Ghi-wuk said. He added that if corporate demand persists, the government may consider additional extensions to the program's duration.
Under the mechanism introduced this month, the South Korean government lends a portion of its crude oil reserves, primarily sourced from the Middle East, to domestic refiners. The refiners are then required to replenish the government's stockpile with alternative supplies they secure at a later date. The program was originally scheduled for a two-month run, concluding at the end of May.
Regarding South Korea's commitment to release 22.46 million barrels of oil reserves as part of an agreement among International Energy Agency (IEA) member countries, Yang Ghi-wuk indicated that the government would first assess whether refiners genuinely need this oil to be released, particularly in the context of the ongoing swap mechanism.
Last month, South Korea agreed to participate in a collective action by IEA members, pledging to release crude oil inventories by June 9th. This move aims to help stabilize global oil markets against the backdrop of persistent conflict in the Middle East.
On the supply situation of naphtha, a crucial industrial feedstock used widely across various sectors, Yang Ghi-wuk noted that the United States has become South Korea's largest supplier since the outbreak of conflict involving Iran.
Data from the Ministry of Trade, Industry and Energy shows that the U.S. currently accounts for the largest share of South Korea's naphtha imports at 24.7%, followed by India (23.2%), Algeria (14.5%), the United Arab Emirates (10.2%), and Greece (4.5%).
When asked if this shift indicates a fundamental change in South Korea's naphtha supply chain, Yang Ghi-wuk expressed caution. He suggested it is too early to declare a structural shift, emphasizing that the naphtha market remains highly sensitive to price fluctuations.
Mr. Yang stated that domestic supplies of naphtha are expected to stabilize next month. This anticipated stability is attributed to South Korea's continued efforts to diversify import sources and implement supportive policy measures.
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