S.Korea imports Canadian oil for 1st time under Trump's 2nd term

South Korea has imported crude oil from Canada for the first time amid escalating tariff tensions between the US and Canada since Donald Trump's return to the White House. 

In April, HD Hyundai Oilbank Co., a South Korean oil refiner, imported 548,000 barrels of crude oil, worth 113.1 billion won ($82.3 million), from Canada, said industry sources on Monday.

It marked the first oil shipment from the North American country since Donald Trump entered his second term in January. However, HD Hyundai Oilbank has imported Canadian oil in the past.

The shipment followed the Trump administration’s executive order signed in February to impose a 10% tariff on energy imports from Canada, as well as a 25% universal tariff on imports from Mexico.

The import volume accounted for roughly 0.4% of Canada's monthly oil production of 148.2 million barrels. However, industry watchers said the shipment could be as a turning point for South Korea to boost crude imports from Canada.

The oil imports serve the needs of both countries: Canada aims to cut its dependence on the US for exports, while South Korea looks to diversify away from Saudi Arabia and the US in search of cheaper crude.

The US is Canada’s biggest oil export market, accounting for 80% of its oil shipments.

South Korea, home to the world's leading petrochemical companies, is expected to benefit from Canada's export diversification policy.

"SK Innovation and other oil refiners are also considering Canadian oil imports, following HD Hyundai Oilbank's move," said an official at a Korean refining company.

SK Innovation Co. owns 100% of SK Energy Co., South Korea's largest oil refining company.

"If Canada is diversifying its oil exports as part of a mid-to-long-term strategy, we could enter into long-term import contracts for Canadian crude," he told The Korea Economic Daily.

Canadian crude oil is trading at $69.77 per barrel, about $6-$10 cheaper than the US crude at $77.50 and Saudi Arabian crude at $75.96, according to Petronet, a data platform of Korea National Oil Corp.

Canadian oil is heavy crude with high viscosity. It requires special handling during transportation. Also, due to the longer distance between South Korea and Canada, freight and insurance costs are higher than for shipments from the US and Saudi Arabia. 

Nevertheless, industry officials say that even after factoring in these expenses, Canadian crude remains cheaper to import.

Canadian crude imports are expected to alleviate cost pressure for domestic petrochemical companies struggling with falling refining margins due to a supply glut and overcapacity. 

HD Hyundai Oilbank's first-quarter operating profit plunged 89% to 31.1 billion won from the same quarter a year earlier.

While China boosts imports of Canadian crude, the rise in Canadian shipments to Asia is fueling expectations that Middle Eastern crude prices could soften.

"Canada's strategy to diversify oil export markets will likely affect Asian countries, including South Korea, depending on how aggressively it pursues it," said an official at a domestic oil refiner. 

Write to Sang-Hoon Sung at uphoon@hankyung.com



Yeonhee Kim edited this article.