Emergency Oil Supply Review Amid Renewed Middle East Tensions... MOTIE to Resume Diversified Shipping Cost Support from September

MOTIE Holds Emergency Meeting on Crude Oil Supply and Demand
"Short-Term Impact on Domestic Oil Supply Expected to Be Limited"
Strategic Reserve Swap Resumed Until October, Possible Extension if Needed

With military tensions rising again in the Middle East, the government has launched an emergency review of the national crude oil supply and demand situation. While the government believes that the impact on the country’s oil supply will be limited in the short term, it has decided to resume the 'strategic oil reserve swap,' a scheme where government-held oil reserves are lent to refiners, and also fully support all additional shipping costs that arise when importing crude oil from non-Middle Eastern regions, starting with September cargoes, through the ‘support for diversified shipping cost differences’ initiative.

The Ministry of Trade, Industry and Energy announced that Vice Minister Moon Sinhak convened an ‘Emergency Meeting on Crude Oil Supply and Demand’ on September 14, where the current status of South Korea's crude oil supply and tanker passage was closely reviewed and future joint public-private response plans were discussed. The meeting was held amid escalating tensions in the Hormuz Strait and the Red Sea area, including ongoing hostilities between the United States and Iran, Houthi attacks on Saudi Arabian oil facilities, the occupation of Perim Island, and even a recent attack on the Saudi East-West oil pipeline—all situations posing potential risks to crude oil supply.

The Asia Business Daily DB

At the meeting, the refining industry reported that crude oil imports in July and August exceeded 100% compared to last year, and procurement for September and October has already secured over 90% of last year’s volume. Therefore, they assessed that the short-term impact on the domestic oil supply would be minimal.

From the early stages of the Middle East crisis, the government has been closely monitoring the situation via a government-industry communication and inspection system. It will continue to monitor developments on the resumption of Saudi pipelines and actively support the switching of shipping routes, such as diversion via the Suez Canal.

To begin with, the government plans to mobilize all available policy tools, such as the strategic oil reserve swap program resumed on August 24, to tackle the crisis. The reserve swap involves the government lending its strategic oil stocks to refiners, who return the same amount after securing replacement crude oil from abroad. The government resumed this program for a two-month period starting August 24, after suspending it since the end of June. The Ministry of Trade, Industry and Energy stated that an extension is possible if necessary.

Diversifying crude oil import sources is also being pursued. In response to the Middle East conflict, the government fully supported the additional shipping costs for crude oil imported from non-Middle Eastern regions during April to June this year. As a result, imports of U.S. crude oil reached 95,872,000 barrels, a 14.2% increase over the previous year’s period; Canadian crude imports jumped by 160.8%, and Ecuadorian crude imports soared by 422.1%. Imports of African crude oil also rose to 25,989,000 barrels, up 156.7%. The government plans to resume full support for shipping cost differences for September imports, following the same approach as previously.

Vice Minister Moon stated, “In addition to the strategic reserve swap program, we will proactively cooperate with relevant ministries to expand support for diversified shipping cost differences. This will help our industry secure alternative supplies without disruptions, and we will work to consistently maintain our current level of import diversification.”

This content was produced with the assistance of AI translation services.