South Korea's political conflict poses no risk to oil products supplies to Asia-Oceania customers

South Korea's political conflict would pose no risk to refiners' spot and term oil products supply commitments to various customers across Asia and Oceania, though trade unions' strike could cause minor delays in domestic retail fuel supply network, refining industry sources said Dec. 4.

The extreme political left-right division and tensions exploded as President Yoon Suk Yeol declared an emergency martial law late night Dec. 3, but the conflict is purely political and not economical. Local politics have zero impact on refinery operations, crude throughput and oil products output as all of the country's major refiners are private sector companies, not state run, feedstock managers and middle distillate marketers at three South Korean refiners said.

The sources declined to be identified due to the highly sensitive nature of recent domestic political conflict.

Yoon's declaration of martial law at around 11 pm local time (1400 GMT) Dec. 3 was short-lived as 190 out of total 300 members of parliament were quick to gather at the National Assembly and voted to reject military rule. In the end, the martial law only lasted several hours as the lawmakers unanimously rejected the decree, with opposition members of parliament vowing to proceed with an immediate impeachment of the president.

Domestic political tensions could shake the local equities and fixed-income market in the short term but the conflict between the liberals and conservatives has no correlation to South Korea's refining industry. Every single buyer and customer of South Korea's spot and term gasoline, gasoil/diesel and jet fuel/kerosene cargoes can be assured that their supplies are fully guaranteed, clean product sales executives and marketing managers at two South Korean refiners told S&P Global Commodity Insights.

South Korea -- Asia's largest net exporter and supplier of clean oil products -- sold 346.05 million barrels of gasoline, gasoil and jet fuel combined in the first 10 months of 2024, up 7.8% year on year, the latest data from state-run Korea National Oil Corp. showed.

South Korea is also Asia's third biggest crude importer with a total refining capacity of around 3.4 million b/d. On average, the country's four major refiners including SK Energy, GS Caltex, S-Oil and Hyundai Oilbank export around 40% of oil products they produce.

"The martial law had absolutely nothing to do with North Korea or any risk of war ... besides, it was very short lived and the city of Seoul suffered no casualties with very little damages ... this is exactly what we are trying to explain to some of our [overseas] customers," said a middle distillate sales manager at a major South Korean refiner who declined to be identified due to the sensitive nature of domestic politics.

Among recent spot tenders, the country's third-largest refiner S-Oil sold 300,000 barrels of jet A-1 fuel for Dec. 29-31 loading, while top refiner SK Energy sold 900,000 barrels of 10 ppm sulfur gasoil for loading in Dec. 18-Jan. 2.

"As for our crude suppliers, I don't think they are bothered by this political event because they are fully aware South Korea is an advanced economy and there's no way South Korean corporates would ever struggle with oil payments," a feedstock manager at another refiner said.

Trade union strike in focus

However, oil product wholesale and distribution management sources at two major South Korean refiners fretted that domestic fuel supply and logistics could be slightly affected as South Korea's major labor unions and thousands of workers announced they would launch an indefinite strike, unless President Yoon immediately steps down.

Mostly public transport sector workers would be involved in the upcoming strikes but if a large number of truck drivers also join the protest, gasoline and diesel distribution could be disrupted to some extent, a product sales and distribution manager at a third South Korean refiner said.

South Korea consumed 251.4 million barrels of gasoline, gasoil and jet fuel/kerosene combined in the first 10 months of 2024, latest data from state-run Korea National Oil Corp. showed.

The Korean Confederation of Trade Unions, or KTCU, accused Yoon of abusing his authority to suppress his opposition and stated that the president had "committed "a coup d'état."

South Korea's ruling People Power Party was heavily defeated in April 10 parliamentary election, which was considered a mid-term judgment for the unpopular President Yoon who took office in May 2022.

A coalition of lawmakers from liberal opposition parties including the Democratic Party and Rebuilding Korea Party indicated that they plan to propose a bill to impeach the president and go to a parliamentary vote within this week.

Opposition parties combined hold almost two-thirds of the 300 seats in the National Assembly.