The 5,100-tonne KOTI was detained two weeks ago at the South's port of Pyeongtaek-Dangjin and its crew are being investigated over the alleged ship-to-ship transfers, Yonhap news agency cited local maritime officials as saying.
The seizing of the ships is part of ongoing efforts to implement U.N. Security Council resolutions on North Korea.
South Korean authorities seized a second oil tanker for allegedly supplying fuels to North Korea at sea, the South's media reported on Sunday.
Acting on intelligence provided by the U.S. - including surveillance photos of an exchange taken by satellite - South Korean customs officials boarded the vessel, the Lighthouse Winmore, when it entered Yeosu Port on November 24, Yonhap news reported.
Under the most recent sanctions, imposed in early December, North Korea is only permitted to import 500,000 barrels of refined petroleum a year, a reduction of 86 percent of its previous imports. "China will continue to participate in the work of the relevant Security Council sanctions committee on this principle", its foreign ministry said in a statement. "As for the KOTI, an investigation is underway", a foreign ministry spokeswoman told CNN by telephone.
Last month, the UN Security Council voted unanimously to punish President Kim Jong Un's regime for a missile test by limiting access to refined oil and requir ing all North Koreans working overseas to return home in 24 months.
The South Korean government announced on Friday that it briefly seized and inspected a Hong Kong-registered ship in November after accusing it of transferring oil products to a North Korean vessel. But South Korean officials did not confirm if the Lighthouse Winmore was one of the vessels pictured.
Four ships - three North Korean vessels and a Palau-flagged oil tanker - were blocked from worldwide ports by the UN Security Council on Thursday on suspicion of carrying or transporting goods banned by the sanctions. Only four of the ships on the US list, the ones belonging to North Korea including Sam Jong 2 and Rye Song Gang 1, were blacklisted at a session held on Thursday, as AFP reported.
CNN's Taehoon Lee reported from in Seoul, Lauren Said-Moorhouse wrote from London while Yuli Yang and James Griffiths contributed from Hong Kong.