[Photo by Korea National Oil Corporation]

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The South Korean government has set this year’s strategic reserve crude oil and diesel purchase target at 640,000 barrels, up 2.5 times from a year ago in a bid to take advantage of the recent crash in oil prices and aid local refineries grappling with virus-hit demand.

The government announced on Thursday its plan to up this year’s strategic reserves oil to 640,000 barrels from 270,000 barrels last year. This year’s purchase target includes 490,000 barrels of crude oil and 150,000 barrels of diesel, the government added.

The major turnaround from its past year policy to cut down strategic reserve oil aims to secure more crude oil amid low oil prices and support local refiners facing margin pressure due to a drop in oil demand caused by the COVID-19 outbreak.

International oil prices have plunged to 18-year lows by the end of March after Saudi Arabia and Russia, the world’s two largest oil producers, failed to agree to cut oil production but decided to boost output. Coupled with the collapse in oil demand amid the COVID-19 pandemic, their tug-of-war triggered a downward spiral of oil prices. Brent crude oil futures, the global oil benchmark, were trading at around $33.95 a barrel on Thursday.

South Korea has purchased less strategic reserve oil since 2017 under its 10-year purchasing plan designed seven years ago when oil prices flied high at over $80 per barrel. It already met 96 percent of its target in early stages of the plan.

The latest decision is an additional relief measure to help local refiners grappling with the slump in demand. The Ministry of Trade, Industry and Energy on Monday said that the government will lease spare oil storage facilities to refiners struggling to find space to store their mounting inventory from April to June.

The government also decided to defer collection of second-quarter crude oil import tax for three months. The crude oil import tax has remained at 16 won per liter since 2006 regardless of oil price changes.

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