South Korea's Industry Minister Kim Jeong-kwan said Tuesday that the country's expected crude oil imports for August are steadily increasing, dismissing concerns over a potential supply crisis.
"Expected crude oil import volumes for August are steadily increasing," Kim said. "Considering recent trends, crude oil imports are projected to reach the mid-80% range of normal levels by July."
Kim made the remarks at a Cabinet meeting chaired by President Lee Jae-myung at the presidential office. The comments suggest that most of the crude oil needed for August can be secured without difficulty by July.
"From May to July, we have secured 86% of crude oil and 83% of naphtha compared to the previous year, and the naphtha operating rate stood at approximately 75% as of the end of May," Kim said. "Considering that the pre-war normal naphtha operating rate was 80% and that recent export restrictions have been imposed on naphtha, operations are effectively running at normal levels."
On natural gas, despite concerns following Qatar's recent declaration of force majeure on liquefied natural gas (LNG) supplies, Kim emphasized that alternative volumes for use through the end of this year have already been secured from the United States and Southeast Asia.
Some market observers had previously raised concerns that a prolonged closure of the Strait of Hormuz due to the Middle East conflict could trigger a crude oil supply crisis around August. Power demand typically rises in July and August due to air conditioning use during hot weather. The International Energy Agency (IEA) had also warned that the global oil market could enter a danger zone in July and August as Middle East supply disruptions coincide with seasonal demand increases.
Meanwhile, the government has decided to extend the operation period of its strategic petroleum reserve swap program from the original May deadline to this month, in order to reduce disruptions to crude oil supply and petroleum product output. Under the swap system, the government first lends reserve oil to refiners that prove they have secured crude oil overseas, and is later repaid when replacement volumes arrive in the country. The current swap volume stands at approximately 21 million barrels, and refiners are gradually repaying the exchanged volumes.
The government also plans to soon announce criteria for compensating refiners for losses resulting from the implementation of an oil price ceiling system. "We will soon prepare a notice containing the principles and criteria for loss compensation, and form a maximum price settlement committee this month," Kim said.
