Oil Industry's Q1 Exports Hit 10-Year Low at 90.94 Million Barrels

Oil Industry Seeks Rebound in Petroleum Product Exports with Country-Specific Strategies
Expectations for Future Recovery Driven by Export Profitability Improvement and Support from China, Australia, and Aviation Fuel

[Asia Economy Reporter Hwang Yoon-joo] The refining industry, which suffered its worst performance decline last year due to COVID-19, saw a decrease in export volumes in the first quarter of this year. The export volume for the first quarter recorded the lowest level in 10 years since the first quarter of 2011.

The Korea Petroleum Association announced that in the first quarter, the volume of petroleum products exported by domestic refiners such as SK Energy, GS Caltex, S-OIL, and Hyundai Oilbank was 90.94 million barrels, down 27.4% compared to the same period last year, and the export value was $6.143 billion, down 18.9% during the same period.

This was due to the rapid decline in global oil demand caused by the COVID-19 pandemic, leading domestic refiners to adjust their operating rates accordingly. The domestic refining operating rate fell from 81.6% in the first quarter of 2020 to 72% in the first quarter of this year.

Despite the decrease in product exports, the refining industry is adopting strategies to seek a rebound by responding swiftly to changes in product demand by country. The ranking of petroleum product export destinations in the first quarter was China (36.9%), Japan (14.4%), Australia (8.8%), the United States (8.6%), and Singapore (6.9%). Exports to China remained the highest at 33.6 million barrels, nearly doubling its share from 19% in the same period last year. Sixty-nine percent of exports to China were diesel, indicating that the refining industry focused on exports to China, which was the first country to recover from the impact of COVID-19 compared to others.

Japan, ranked second, is geographically one of the easiest export destinations along with China. In the first quarter, it exported 13.12 million barrels, moving up one rank from third place last year. Notably, exports of heating oil and kerosene increased by 22% due to the emergency shutdown of refining facilities caused by the earthquake in Fukushima Prefecture in February this year.

Australia’s rise is also noteworthy. Australia, which was fifth in the first quarter last year, surpassed the United States and Singapore?both experiencing declines due to weak aviation demand and excess spot market inventory?to become the third largest export destination. The refining industry doubled diesel exports to Australia after aviation fuel exports to Australia plummeted by 99% due to COVID-19. Australia has been affected by reduced petroleum product supply following British Petroleum (BP)’s announcement last September to close the Kwinana refinery, the largest in Australia, and ExxonMobil’s decision in February this year to close the Altona refinery.

Along with country-specific responses, the refining industry is also adjusting according to supply and demand changes by product. According to the U.S. Transportation Security Administration (TSA), the number of passengers at U.S. airports increased from 23.6 million in January to 24.45 million in February and 38.05 million in March. With the rapid rollout of COVID-19 vaccinations in the U.S., air travel demand is gradually recovering from a low of 3.25 million passengers in April last year.

In line with the recovery of U.S. aviation demand, the refining industry is increasing exports of jet fuel to the U.S. The share of the U.S. in total jet fuel exports rose significantly from 43% in January to 48% in February and 83% in March.

The export profitability of the refining industry is also improving. In the first quarter of last year, the crude oil import price was $62.3 per barrel, higher than the product export price of $60.5 per barrel, which contributed to worsening business performance. However, this year, the product export price rose to $67.6 per barrel, $9.4 higher than the crude oil import price of $58.1 per barrel. Compared to last year, when ‘push-out’ exports were made due to the sharp drop in oil demand and storage capacity limits, the export structure has improved.

A representative from the Korea Petroleum Association stated, "It will take some time for petroleum product demand and refining margins to recover to pre-COVID-19 levels, but the refining industry will compete in the global export market with strategies tailored to diversifying export countries and responding to supply and demand situations by country."

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