With about ten days remaining until the deadline for releasing strategic oil reserves under the International Energy Agency (IEA) joint resolution, the South Korean government has decided to lower the mandatory private stockpile days. This decision comes as refiners accelerate the import of alternative crude oil, and approximately 15 million barrels of strategic oil swap are already circulating in the market, leading to the conclusion that government releases would be less effective.
Yang Gi-wook, head of the Ministry of Trade, Industry and Energy's Resource Security Division, announced on May 28 during a briefing at the Sejong Government Complex, "We have decided to implement the IEA international cooperation by adjusting the mandatory private stockpile days. We will issue a notice to reduce the requirement from 40 days to 20 days, effective from May 29."
Previously, on March 11, shortly after the outbreak of war in the Middle East, the IEA decided to release a record 400 million barrels of strategic oil. South Korea's share of this release amounts to 22.46 million barrels, which must be completed by June 9.
According to the Ministry of Trade, the IEA's release conditions differentiate between government releases from strategic oil storage facilities and private releases through the adjustment of mandatory stockpile days. Initially, the government had informed the IEA that it would utilize both government and private releases equally.
This new approach indicates a preference for proceeding primarily with private releases. Yang emphasized, "We made this decision based on three factors: the national interest, the current domestic crude oil supply situation, and the prolonged uncertainty in the Middle East. Given that there are no significant issues with the current domestic supply situation, we are moving forward with private releases to comply with the IEA joint resolution."
The estimated volume for the private release under the joint resolution is 12 million barrels. The government believes that reducing the mandatory private stockpile will allow refiners to manage their inventories more effectively. However, since refiners currently have sufficient stock, the release of private reserves is not expected to happen immediately.
Yang noted, "This means that the private sector will have more flexibility in how they utilize their reserves, but it does not imply that they will be released right away. We also considered that the private stockpiles are not significantly different from pre-war levels in the Middle East."
The government estimates that the private sector holds about 90 million barrels of crude oil and products, exceeding the mandatory holding requirement. Given the heightened uncertainty surrounding the Middle East conflict, the government plans to conserve its strategic reserves as much as possible.
Yang stated, "During discussions with refiners, it was suggested that since they have secured alternative supplies, it would be prudent to proceed with strategic oil swaps for the time being, and to release government reserves only if the situation worsens. This was a comprehensive assessment considering the supply situation of the nation and refiners."
Among the 22 million barrels to be released under the IEA joint resolution, the 10.46 million barrels not allocated for private release are unlikely to be released. Yang explained, "Of the 32 IEA member countries, four have not participated in the joint resolution, and as of June 8, ten countries have yet to release any strategic oil. Each country has considerable discretion in this matter."
He added, "Since each country has flexibility regarding their situation, release methods, timing, and volumes, there are no penalties for not releasing. We believe that if we communicate our intentions adequately, the non-release of about 10 million barrels will not become a major issue."
Yang also mentioned, "The strategic oil swap is being viewed as a new method for government reserves to enter the market, and we will be able to explain this adequately to the IEA in the future."
Meanwhile, the government expects to secure crude oil at about 85% of the previous year's levels by July and anticipates no significant issues with crude oil supply in August. Yang remarked, "As we continue to secure alternative supplies, the supply situation does not seem to be difficult, and we do not expect significant differences from June and July."
* This article has been translated by AI.
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