South Korea Gets Ready to Tap Internal Oil Reserves Amid Iran Crisis
South Korea is prepared to release oil from its strategic reserves and supply stored petroleum to the domestic market if the ongoing conflict in the Middle East continues and depletes private inventories, said the government in an urgent meeting to discuss the situation.
The meeting on Sunday was held to evaluate the potential impact and ensure that oil volatility does not excessively affect consumer prices for products such as domestic gasoline.
Officials indicated at the meeting that they have several months’ worth of oil and gas inventories to respond to demand — well above the International Energy Agency’s 90-day recommendation.
As of late 2025, state-owned Korea National Oil Corp. or KNOC held approximately 100 million barrels of government-controlled oil reserves, excluding international joint stockpiles. Combined with private sector holdings, South Korea’s total strategic reserves equate to roughly 200–208 days of demand.
KNOC operates nine stockpiling bases across the country:
- For oil products: Guri, Yongin, Donghae, and Goksung
- For crude oil: Ulsan, Geoje, Yeosu, and Seosan
- For LPG: Pyeongtaek
South Korean refineries import around 70% of their crude from the Middle East Gulf, according to an analyst’s estimate.
Curtailing Exports
There has been market speculation that the government might issue a decree to restrict refineries from exporting their petroleum products, but several traders from South Korea’s oil refineries denied seeing such official notices.
“Refineries need to supply the domestic market first when there is a shortage of oil products,” said a Korean trader.
Several traders from other North Asian refineries told OPIS that they are not offering any petroleum products via tenders or private negotiations for now, and are instead storing them to meet local demand.
Similarly, several Indian refiners said they are storing products and watching developments closely. No fresh exports of clean petroleum products have been observed via tenders so far.
India’s Ministry of Petroleum and Natural Gas said in a post on X on Monday: “We are continuously monitoring the evolving situation, and all steps will be taken in order to ensure availability and affordability of major petroleum products in the country.”
Elsewhere, cargo holders reported difficulties moving cargoes outside Japan, alluding to what they described as an “unofficial ban” which may have been imposed by the country.
“Perhaps it has not been officially announced to avoid spooking the market,” a Singapore-based shipbroker said, adding that similar rumors are circulating about Thailand, South Korea and Taiwan, China.
Drastic Measures
Meanwhile, downstream crackers are already reeling from the fallout of the war, with many forced to suspend or cut output amid a supply crunch, as reported.
A slew of crackers in South Korea have reduced run rates by up to 20 percentage points, while average operating rates in the country stand at around 76%, compared with 88% before the Iran conflict, according to sources.
In a notice declaring force majeure issued on Wednesday, Yeochun NCC attributed the feedstock shortage to escalating Middle East tensions, which have forced it to operate all facilities at minimum rates. The measure took effect the same day.
Typically, South Korean crackers begin replenishing inventories after January, but widening geopolitical tensions have snarled logistics and brought shipments to a halt. Most crackers in the country can operate on existing inventories for only about a month and a half, according to sources.
“We have no choice but to scale back operations,” a source at a major South Korean producer said.
—Reporting by Thomas Cho, tcho@opisnet.com and Yiwen Ju, yju@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com