Korea to increase crude oil reserves, expects higher prices

Petroleum News

The South Korean government said Jan. 18 that it will increase its oil reserves from 149 million barrels to 159.4 million barrels in expectation that the current rise in global oil prices will continue longer than expected. The new reserves number, 159.4 million barrels, is 110.3 days’ worth of oil as compared to 102.8 days’ worth of oil, which was kept in the reserve last year.

“Most institutions forecast oil prices will fall in the second quarter, but we will take necessary steps to tame prices at home if global prices continue to remain high,” the Ministry of Commerce, Industry and Energy said in a press release.

Korea imports most of its oil from the Middle East. Increases in global oil prices results in immediate hikes in import and consumer prices.

The ministry blamed recent high oil prices on speculation spurred by a weaker dollar, colder weather and delayed recovery in oil exports by Iraq.

It predicted oil prices will stay high in the first quarter — in the range of $26-$29 per barrel — before falling to $22-$25 in the second quarter.

In an attempt to diversify its oil import sources, Korea decided to reduce taxes on oil imported from areas other than the Middle East, the ministry said Jan. 16.