Tokyo (Platts)--4Mar2011/543 am EST/1043 GMT

South Korean refiners plan to reduce bonded bunker fuel sales at domestic ports to 680,000-700,000 mt in March, from 740,000 mt in February, with two companies -- S-Oil and Hyundai Oilbank -- preferring to divert more volumes for exports amid rising regional prices, industry sources said Friday.

S-Oil plans to sell 130,000-140,000 mt of bonded bunker fuel in March, down from 160,000 mt in February, industry sources said. But the company plans to export 132,000 mt of high sulfur fuel oil in March, compared to more typical volumes of 80,000 mt/month.

The refiner has sold the March-loading HSFO cargoes at a premium of $8-10/mt to the Mean of Platts 380 CST HSFO assessments on FOB South Korea basis.

By comparison, South Korea's 380 CST bunker premium was $24.53/mt to MOPS 380 CST HSFO assessments Thursday. But this includes barging costs of about $10/mt as well as other expenses, which are borne by the supplier of the bonded bunker fuel.

"If we compare FOB values, bunker prices and export prices are similar. Considering the time and effort for bunker shipments, exporting high sulfur fuel oil is more profitable," a source close to the matter said.

In addition to similar premium levels, refiners also prefer to export cargoes as they are usually larger sizes of 30,000-55,000 mt, compared with bonded bunker fuel shipments of about 300-2,500 mt.

Fellow refiner Hyundai Oilbank also plans to reduce its bonded bunker fuel sales to 150,000-160,000 mt in March, compared with 180,000 mt in February, a company source said. The refiner plans to increase HSFO exports to 220,000 mt in March, from 165,000 mt in February, the source added.

A separate Hyundai Oilbank source said that the company is getting premiums of more than $10/mt to MOPS 380 CST HSFO assessments for March exports.

But GS Caltex and SK Energy plan to maintain their March bonded bunker fuel sales at 220,000 mt and 180,000 mt, respectively -- similar to February levels.

Bunker demand in South Korea has been weak since late February because of volatile crude prices, while supplies are ample, say industry sources.

"Shipping companies are waiting and not buying," said a refining source.

--Atsuko Kawasaki, atsuko_kawasaki@platts.com

Similar stories appear in Bunkerwire. See more information at http://bit.ly/Bunkerwire