South Korea extends oil swap system amid Hormuz uncertainties

The government extended the operation of its crude oil swap system with private firms until the end of this month amid continuing uncertainties surrounding the Strait of Hormuz, a critical oil shipping route, the industry ministry said Tuesday.

The government introduced the oil swap system in April in a bid to stabilize domestic fuel supplies following the outbreak of the U.S.-Israeli war against Iran.

Under the system, the government has been lending some of the crude stockpiles from its oil reserves, mostly Middle Eastern crude, to oil refiners under an agreement they will later restore the stock when alternative supplies are secured. The system was initially set for a two-month operation until the end of May.

Until now, the government traded a combined 21 million barrels of oil stockpiles with private firms, according to the Ministry of Trade, Industry and Resources.

The ministry has said South Korea has secured about 85 percent of pre-Iran war oil supplies for use throughout July and is expected to have no major disruptions in crude supplies in August.

Industry Minister Kim Jung-kwan also said during a Cabinet meeting earlier in the day that oil supplies secured for use in August are continuing to increase, sapping concerns over a possible oil crisis in the summer.

Last month, the International Energy Agency Executive Director Fatih Birol warned that commercial oil inventories are depleting at a "very fast" pace, noting that oil markets could enter a "red zone" in July or August.