Korea National Oil Corporation to Increase Strategic Petroleum Reserves by 2.4 Times

Securing 640,000 Barrels Using Low Oil Prices
Helping the Refining Industry Amid Sharp Demand Drop

[Asia Economy Reporter Moon Chaeseok] Korea National Oil Corporation (KNOC) has decided to secure 640,000 barrels of strategic petroleum reserves this year. This is about 2.4 times more than last year, aiming to stock up in advance while prices are low. On the 14th, KNOC announced that it will purchase 640,000 barrels of reserves this year following the Ministry of Trade, Industry and Energy's decision to buy reserves by taking advantage of the low oil price market. With a budget of 31.4 billion KRW allocated by the ministry, it plans to secure 490,000 barrels of crude oil and 150,000 barrels of diesel. The corporation held a bid for some quantities earlier this month and plans to hold additional bids at an appropriate time considering oil price conditions for the remaining quantities.

This additional purchase decision by KNOC is expected to help the refining industry, which is struggling due to a sharp drop in demand caused by the COVID-19 pandemic and increased oil price volatility from the oil-producing countries' 'chicken game.' Refining companies have welcomed the move. Demand has plummeted to the extent that it is difficult to find buyers even for dumping overseas. A representative from one refinery said, "The government's reserve volume is larger than expected, so it feels like we've been put on a ventilator," adding, "We plan to actively participate in the bidding." Another refinery official said, "Even if we fail to win the bid, it helps because the market supply decreases by that amount." Professor Lee Deokhwan, an emeritus professor of chemistry and science communication at Sogang University, commented, "From a national interest perspective, if the economy recovers after the COVID-19 situation settles, this will be regarded as a well-timed stockpiling when oil prices were low."

Meanwhile, strategic petroleum reserves refer to quantities held despite costs such as building storage facilities and paying interest on purchase costs, to regulate domestic supply when war breaks out or relations with oil-producing countries deteriorate, making oil imports impossible. KNOC had aimed to secure 107 million barrels of reserves under the 4th Petroleum Stockpiling Plan, effective until 2025, but has increased the purchase volume this time. As of the end of last year, the reserve volume was 96.5 million barrels, which is 95.8% of the 4th plan's target.

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