South Korea imported almost 60 percent more crude from Iran in April than in March, pushing purchases to their highest level this year and reversing a decline that began in January after the United States announced sanctions against Tehran.
At more than 7.5 million barrels, April’s imports were the highest since November 2011, and were also 42 percent more than the same month a year ago, data from the state-run Korea National Oil Corp. (KNOC) showed on Tuesday.
In March, imports were down 40 percent on the year.
Some analysts said South Korea, one of Iran’s biggest customers, was stockpiling crude ahead of a European Union ban on shipping insurance which takes effect on July 1, and which would make it extremely difficult to ship Iranian oil.
Industry sources had said the two refiners that import Iranian oil would stop purchases when the ban takes effect, making South Korea the first of Iran's major customers to completely halt imports.
“This increase in Iran crude oil imports in April might be because they are importing more in advance due to notice about halting Iran crude oil imports,” said Yoo Young-kook, senior analyst at KTB Investment & Securities Co. Ltd.
“Another scenario is that there might be an expectation that Iran sanctions will be resolved positively so the purchases are increasing,” Yoo said.
Iran and world powers agreed to meet again next month to try to ease the standoff over Tehran’s nuclear program despite achieving scant progress at talks in Baghdad.
Bucking a downtrend
Government officials and industry sources declined to comment on the rise in imports, saying the issue was politically sensitive. April’s imports bucked a downtrend that had decreased cumulative crude imports from Iran since the beginning of the year by 10 percent versus the same period a year ago.
South Korea is seeking a waiver from U.S. financial sanctions against Iran that were announced on Dec. 31 and which take effect end-June, but Washington has said exemptions will be granted only to countries that make big cuts to their crude imports.
Japan, which has already won a waiver from the United States for slashing its imports from Iran, is also seeking a similar exemption.
South Korea’s government has shied away from officially declaring a position on whether it will stop or reduce its Iranian oil imports. The United States is its main guarantor for security against North Korea, which has a nuclear weapons program.
The United States and Europe are trying to squeeze the revenues Iran makes from oil exports in order to force it to halt a nuclear program they fear will be used to make weapons, but which Tehran says is for power generation.
Iran’s oil exports, which were up to 2.2 million barrels per days (bpd) last year, have not dropped further in May after falling sharply since March, industry sources said this month, as core customers in Europe and Asia continue to buy ahead of the application of European sanctions.
China, the world’s second biggest oil consumer and another major Asian buyer of Iranian crude, increased its oil imports from Iran by 50 percent in April compared to March after both sides resolved a pricing dispute.
Japan is expected to have maintained its steep cuts in Iranian oil imports in April, traders said, while India cut its purchases from Iran by a third in April compared with March.
Turning to Gulf oil producers
South Korea imported 25.25 million barrels from Iran during the first four months of this year, down about 10 percent from 28.1 million during the same period a year ago, the KNOC data showed.
The jump in April contrasts sharply with imports in March, which fell 40 percent from a year ago to 155,000 bpd as South Korea slashed Iranian imports and a crude distillation unit was closed for maintenance work.
Seoul imported more than 250,000 bpd of Iranian crude in April, compared with its term import agreement at 200,000 bpd this year.
Of South Korea’s four refiners, only SK Energy and Hyundai Oilbank import Iranian crude. Sources said both refiners will stop importing from Iran when the EU insurance embargo takes effect from July 1.
The South Korean government, however, is still lobbying the EU to exempt it from the ban.
South Korea has turned to other Middle Eastern producers, including the world’s top exporter Saudi Arabia, the United Arab Emirates (UAE), Kuwait and Qatar to make up the Iran supply cuts.
Shipments from Kuwait in January-April rose 15 percent to nearly 328,000 bpd, while those from Saudi Arabia rose 5 percent to about 825,000 bpd, and increased almost 10 percent from the UAE to 250,000 bpd, the data showed.
From Qatar, the January-April imports rose 10 percent to more than 288,000 bpd, according to the data.