South Korea eases diesel export cap to 110 percent of year-earlier volumes

South Korea's industry ministry said Thursday it will conditionally ease its cap on diesel exports, allowing refiners to ship up to 110 percent of year-earlier volumes from November, citing a sustained global diesel shortage and weaker domestic consumption.

The measure loosens a limit imposed on March 13, when the ministry tied exports of petroleum products covered by the country's maximum-price scheme to 100 percent of the same month a year earlier. Domestic diesel consumption has fallen 7.2 percent cumulatively since the price cap took effect, the ministry said.

The decision followed requests from the refining industry to loosen the export restriction as the global diesel supply shortfall persisted. The ministry also said it expects no disruption to crude supplies, having secured imports for October and November at more than 100 percent of last year's average. Refiners will be allowed to use surplus volumes for export only where they meet domestic supply obligations and hold adequate stockpiles, and the ministry will adjust the limit in line with domestic supply conditions.

The easing rests on a proviso to Article 8 of the ministry's regulation on maximum petroleum sale prices and excess-export limits, which allows the minister to adjust export quotas in consultation with refiners and importers. Refiners can apply for additional export volumes from this week, with the relaxed limit applying to November shipments.

The ministry is also preparing to adjust export quotas when foreign governments submit formal written requests specifying the type of petroleum product, volume and supply period, judging such requests on whether they serve the national interest and comply with international sanctions.

The government will revert immediately to the original 100 percent threshold if domestic supply conditions deteriorate, the ministry said, and will keep monitoring the market amid continuing tensions in the Middle East.