Japanese oil demand contracted for the twelfth consecutive month in September, this time by 0.14 mb/d y/y to 3.3 mb/d. Demand for all products fell y/y, except FO and LPG, with the latter rising by 23 thousand b/d y/y at the expense of naphtha, which fell by 0.14 mb/d, the largest y/y decline in over four years. Feedstock substitution continued to boost demand for LPG, but higher cracker maintenance—by almost 1 Mtpy y/y—ultimately resulted in much lower naphtha demand. Fuel oil demand posted a surprise 29 thousand b/d y/y increase as higher utility demand due to soaring temperatures—with CDDs higher y/y by 44%—outweighed the impact from the August restart of Ikata U3 nuclear reactor. Fuel oil demand will be supported this winter as Japan is likely to operate only two nuclear reactors, with back-to-back mandatory maintenance at Sendai U1 and U2 between October and February. Demand for transportation fuels continued to decline, with gasoline down 7 thousand b/d y/y and jet down 15 thousand b/d y/y. Diesel fell marginally, by 2 thousand b/d y/y, despite manufacturing PMI expanding for the first time in seven months at 50.4. Kerosene demand declined by 11 thousand b/d y/y.
Refinery runs fell by 91 thousand b/d y/y to 3.12 mb/d, while the decline in crude imports eased sharply to 27 thousand b/d y/y compared to July and August. Crude imports from Iran rose to their highest since January 2012 at 0.31 mb/d, up by 0.14 mb/d y/y, though this was offset by lower imports from Iraq (-69 thousand b/d y/y) and Saudi Arabia (-94 thousand b/d y/y). Stronger diesel exports, at a three-year high of 0.23 mb/d, helped keep product exports elevated at 0.66 mb/d. Crude inventories rose m/m by 2.8 mb from August’s 16-month low, while product inventories declined m/m by 1.3 mb with gasoline inventories at a nine-month low.