South Korean bunker suppliers are saddled with high inventories that are weighing down on premiums in what is usually a peak demand season for the regional fuel oil market.
Traders said supplies in the local market has been building up over the past month in anticipation of a surge in demand in December. However, with marine fuel demand still relatively sluggish, there are too many sellers in the market chasing a few buyers.
"(Sellers) need to lower offer premium levels, it seems competitive recently," a trader with a South Korean refiner said.
The fundamental weakness is already being felt at key bunkering ports, with suppliers heard offering oil at lower premiums to attract buyers. Delivered 380 CST bunker fuel fell $15/mt day on day Wednesday to $420/mt, S&P Global Platts data showed.
"Demand hasn't picked up yet in December, (and) market is silent until now," a trader with a bunker supplier said.
Fuel oil is a seasonal product in South Korea, where winter demand can be as high as 30% over summer volumes because of greater use in heating and power generation. As more fuel oil is diverted to utilities during winter, much of the marine fuel requirement is met through imports.
Local stocks are likely to remain at elevated levels with S-Oil -- which had ramped up fuel oil exports in recent months -- has skipped exports in December.
"There is enough volume for December, inventory has improved from October-November," the trader with the refiner said.
