South Korea Cuts Private Oil Reserves, Energy Market is Tense

South Korea has cut oil reserve obligations for private refiners. This step was taken to fulfill the oil release commitment in a joint action with the International Energy Agency or IEA member countries, amid oil market disruptions due to the US-Israel war against Iran, as reported by Yonhap, Thursday, May 28.

Starting Friday, private oil refiners in South Korea are only required to keep reserves equivalent to 20 days of average domestic sales. This rule applies until further notice.

Previously, the oil reserve obligation for refining companies reached 40 days.

South Korea's Deputy Minister of Trade, Industry, and Resources Security, Yang Ghi-wuk, said the decision was made so that Seoul could carry out its commitment to release 22.46 million barrels of oil from strategic reserves by June 9.

The commitment is part of a joint plan by 32 IEA member countries to help mitigate disruptions in the oil market.

The IEA recognizes the easing of private oil reserve obligations as part of the release of strategic reserves. With this new rule, refining companies can release supplies to the market voluntarily.

With this policy, the Seoul government plans to report to the IEA the release of about 12 million barrels of oil.

For Seoul, this is a quick way to add supply to the market without waiting for the entire strategic reserve mechanism to be opened directly by the country. The market is tense. Oil, as usual, is never just about energy.