Crude Oil Crisis Alert Downgraded from 'Alert' to 'Caution'; Natural Gas Alert Lifted

[Financial News] The government will lower the resource security crisis alert for crude oil from 'alert' to 'caution' as of midnight on July 1, while lifting the 'caution' alert for natural gas. The move follows improved conditions for crude oil and natural gas imports as vessel traffic through the Strait of Hormuz gradually resumes after the United States and Iran signed a ceasefire memorandum of understanding (MOU).
The Ministry of Trade, Industry and Energy announced on the 30th that, after consultations with relevant ministries, it will also gradually end or ease the emergency supply measures introduced after the outbreak of war in the Middle East, alongside the downgrade in the crisis alert.
Under the Special Act on National Resources Security, the resource security crisis alert is operated on four levels: 'interest,' 'caution,' 'alert,' and 'severe.' For crude oil, the 'interest' level was issued on March 5, shortly after the war broke out, and was then raised in succession to 'caution' on March 18 and 'alert' on April 2 as supply conditions worsened due to the continued blockade of the Strait of Hormuz. Natural gas was also raised to 'interest' on March 5 and 'caution' on April 2, and that level has remained in place since then.
The basis for lowering the crude oil alert is actual shipping data. The government said it confirmed that six of seven tankers bound for South Korea that had been anchored in the Persian Gulf inside the Strait of Hormuz before the war broke out — four operated by Korean shipping companies and three by foreign carriers — have passed through the Strait of Hormuz and are now en route to Korea. The Combined Maritime Information Center, a multinational consultative body, was also reported to have lowered the risk level for transit through the Strait of Hormuz.
However, the government did not fully lift the crisis alerts. It judged that uncertainties surrounding transit through the Strait of Hormuz have not been completely resolved, and that it is still impossible to rule out possible production disruptions in the future given the attacks on oil production and transport facilities in the Middle East. For that reason, it said the situation must continue to be managed at the 'caution' level with close monitoring. By contrast, for natural gas, although Qatar issued force majeure declarations on March 5 and other dates, the government has secured alternative supplies through spot purchases and overseas resource development volumes, allowing for stable supply management. International prices have also stabilized compared with the sharp surge immediately after the war, leading to the decision to lift the alert.
Emergency supply measures will also be wound down in line with the alert adjustment. The expanded refund of petroleum import levies to support diversification of crude oil imports, the system that compensates for differences in naphtha import prices, and the crude oil stock swap program will all end on June 30 as originally scheduled, reflecting improved market supply conditions. For the naphtha price-difference support program, assistance will be provided for contracts signed by today and for volumes imported through August. However, concerns remain over occasional supply bottlenecks for healthcare products, daily necessities, and petrochemical products used in essential industries because of the complexity of their supply chains. As a result, the regulation on export restrictions and supply-demand adjustments for naphtha, which is set to sunset on August 26, will remain in place. The regulation enacted on April 15 to prohibit hoarding and to manage emergency supply-demand adjustments for petrochemical feedstocks and related materials will also remain in effect for the time being after July.
The government said it will continue to maintain a state of vigilance even after the alert is downgraded. Through cooperation with related agencies such as Korea National Oil Corporation (KNOC), Korea Gas Corporation, and Korea Petroleum Quality & Distribution Authority, as well as refiners and direct natural gas importers, it plans to monitor daily import and supply trends. It also intends to continue joint inspections by an interagency task force aimed at restoring order in the petroleum distribution market. Kim Jung-kwan, Minister of Trade, Industry and Energy, said, "Until the situation is fully normalized and the resource security crisis alert is completely lifted, we will guard against excessive anxiety or complacency and maintain a thorough supply and price monitoring system." He added, "Even after a complete end to the war, we will not stop. We will continue to pursue resource security measures, such as diversifying import sources and strengthening stockpiling capacity, from a long-term perspective."


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