International oil prices topped $100 a barrel for the first time since July as front lines expanded in the Middle East. The move reflects concern that the Bab el-Mandeb Strait in the Red Sea—considered an alternative to the Strait of Hormuz—could also be shut after Yemen's Houthi rebels attacked Saudi Arabia.
Korea's four refiners are on high alert because, after the outbreak of war between the United States and Iran, they transported a significant portion of crude imports via the Red Sea, passing through the Bab el-Mandeb Strait. Depending on future developments in the Middle East, efforts by domestic refiners to diversify supply lines are expected to intensify.
According to major foreign media on the 11th, on the 10th (local time) at the ICE Futures Exchange in London, November Brent crude settled at $107.63 a barrel, up $6.42 from the previous session. It was the first time since July 9 that Brent futures closed above $100 a barrel. Brent also topped $100 a barrel for the second straight day.
International oil prices hit a record high of $126 a barrel in late April before falling to a little over $70 in early July, but they surged again as clashes between the Houthi rebels and Saudi Arabia intensified.
Oil breaking above $100 a barrel again is due to expectations that, with traffic through the Strait of Hormuz effectively blocked by the U.S.-Iran clash and not back to previous levels, the Bab el-Mandeb Strait linking the Red Sea and the Gulf of Aden could also be shut. Ship-tracking firm Kepler said that as of the 8th, 25 cargo ships passed through the Bab el-Mandeb, slightly fewer than the average of 27 ships over the prior 10 days.
Among the four cities in southern Saudi Arabia attacked by the Houthi rebels on the 8th, Jizan had facilities related to crude oil. Jizan is not a crude export port, but it has refining and storage tanks. It is home to a refinery with a capacity of 400,000 barrels per day, where crude drawn from onshore Saudi fields is refined into gasoline, diesel and petrochemical products.
Because Korea's four refiners import crude rather than petroleum products from Saudi Arabia, whether the Bab el-Mandeb Strait will be shut is seen as more critical than the attack on Aramco's refining facilities in Jizan. After the U.S.-Iran war, Saudi Arabia exported crude to Korea via Yanbu on the Red Sea, opposite the Strait of Hormuz. For tankers loading crude at Yanbu, passing through the Bab el-Mandeb is the shortest route to Korea.
A refining industry official said, "If even the Bab el-Mandeb Strait is closed, there is a way to pass through the Suez Canal to the north of the Red Sea," but added, "If we go through the Suez Canal, the transport time increases, which raises shipping costs."
Since May, the volume and share of Saudi crude entering Korea had been increasing. Before the U.S.-Iran war, Saudi crude imports were 33,591,000 barrels, accounting for 35.83% of total crude imports. However, in February, that share fell to 32.03%. The share of Saudi imports at one point in April dropped to 24.7%.
But since May, the volume and share of Saudi crude have rebounded. From May to July, Saudi crude's share of total imports rose gradually from 25.9% → 30.3% → 33%. Import volumes also increased from 72,580,000 barrels → 73,580,000 barrels → 93,180,000 barrels.
However, if the Bab el-Mandeb Strait is shut, the utility of the crude import route via Yanbu could diminish. If the war between Saudi Arabia and the Houthi rebels lasts for more than a month, the impact on Korea's refining industry will be unavoidable. As when the Strait of Hormuz was blocked, voices are calling for diversifying crude import sources by increasing purchases from the United States, Australia and elsewhere.
The government is supporting diversification of import sources by partially refunding additional freight when importing non–Middle Eastern crude, which costs more than bringing in Middle Eastern crude. In the first half of this year, Middle Eastern crude accounted for 62.3% of Korea's imports, down 6.4 percentage points from 68.7% in the first half of last year. U.S. crude accounted for 20.5% in the first half, topping 20% for the first time on a first-half basis.
A refining industry official said, "Supplies through October are secured at normal levels, so there will be no immediate impact," but added, "Both international oil prices and supply-demand conditions hinge on whether the Middle East situation becomes prolonged."