Domestic refiners Hyundai Oilbank and S-Oil, which have a refining capacity of 650,000 b/d and 669,000 b/d respectively, are especially short of bunker supplies as they have reduced their refinery throughput throughout much of this year because of weaker margins. This has led to lower output of most refined products, including very-low sulphur fuel oil (VLSFO).
Demand for middle distillates is also surging ahead of winter. This has led to limited supplies of fuel oil and gasoil bunkers in Busan, the country’s largest bunker port.
Only SK Energy, which operates an 840,000 b/d refinery in Ulsan, is still offering, according to various market participants in Singapore and South Korea.
GS Caltex, which has a refinery capacity of 790,000 b/d, produces less VLSFO compared with the other three South Korean refiners and mainly focuses on high-sulphur fuel oil.
“If you take out two out of only four producers of VLSFO, you will be stretched”, said one Singapore trader. “Like elsewhere, refineries don’t want to hold too much inventory in their tanks now because of the upcoming end of the financial year”, according to a Singapore supplier.
There are a few independent bunker suppliers operating in South Korea, such as GS Global, Olive and Mabong, but they only have limited volumes available. “The few barrels available are mainly going for contract bunkers, with limited availability of spot barrels as a result”, according to one Singapore buyer.
South Korea also struggles with a lack of barge availability. “South Korea, similar to Japan, is always tight with barges, as each time they need to be cleared by customs after loading from the system and before supplying vessels”, according to another Singapore buyer.
Argus assessed the premium of VLSFO in South Korea over Singapore at $29.90/t yesterday, the highest since 3 September 2020. The premium has averaged $13.40/t so far this year.