South Korea buys less UAE naphtha in May

South Korea's naphtha imports from the UAE fell to a two-year low in May, following reduced output by Abu Dhabi's state-owned Adnoc.

South Korea imported 97,500 b/d from the UAE, a 23pc drop from the previous month and down by 24pc from a year earlier, according to GTT customs data. This was the lowest level since 83,800 b/d in May 2022. This was in sharp contrast to imports in this year's first quarter that averaged 205,000 b/d. South Korea imported 192,000 b/d of naphtha from the UAE in 2023.

Adnoc was expected to reduce its naphtha production and exports following a change in its domestic crude slate. Adnoc had started to divert its medium sour crude grade Upper Zakum to its Ruwais refinery complex as part of the company's $3.5bn crude flexibility project, which is designed to free up more of the UAE's lighter, sweeter Murban grade for export. The switch in Ruwais' crude appetite reduces naphtha production, as the yield of naphtha from Upper Zakum crude is less than its Murban grade, said market participants. The actual loss of supplies cannot be confirmed but it is forecast to be around 900,000-1.2mn t/yr (22,000-29,000 b/d), said two petrochemical producers that are also buyers of naphtha from Adnoc.

There is also a South Korean customs investigation under way to ensure cracker operators are not importing oil from sanctioned countries such as Russia. The investigation has reduced "but not stopped" imports of naphtha from commercial storage tanks in places like the UAE and Singapore, said a South Korean trader. Adnoc is the main supplier but there are other smaller UAE suppliers in Fujairah and Hamriyah. Some Korean cracker operators are avoiding commercial tank naphtha because of the customs investigations, another South Korean trader said.

Qatar and Kuwait were the main beneficiaries with South Korea's shift from UAE naphtha. South Korea's imports in May from Qatar and Kuwait rose by 89pc and 45pc month-on-month respectively. Imports from Qatar were 128,500 b/d, while shipments from Kuwait totalled 105,000 b/d. South Korea had imported 50,000 b/d from Qatar and 54,000 b/d from Kuwait in this year's first quarter.

By Aldric Chew