Japanese oil demand resumed declines in January, down y/y by 72 thousand b/d to 3.87 mb/d, despite HDDs being 2% higher y/y, as LNG imports soared to a two-year high and displaced liquids burn. After notching robust annual gains in the prior two months, both kerosene and fuel oil fell back, by 7 thousand b/d y/y to 0.55 mb/d (although still the highest since February 2016) and 19 thousand b/d respectively. Repairs to Hokkaido Electric Power’s 350 MW Date No.1 fuel oil-fired unit that will likely keep it closed until late November also weighed. The largest decline, however, was in direct crude burn, which fell by 0.12 mb/d y/y. LPG demand remained robust and was up y/y by 74 thousand b/d, likely supported by residential heating, while naphtha demand rose to a 12-month high of 0.86 mb/d, down marginally by 8 thousand b/d y/y. Diesel demand remained a bright spot, growing for the third consecutive month, by 15 thousand b/d, as the manufacturing PMI rose to 52.7, its highest reading since March 2014, while gasoline and jet both fell due to travel disruptions caused by heavy snowstorms.
Refinery runs rose to a 23-month high of 3.54 mb/d in January, higher y/y by 59 thousand b/d. Crude imports grew by a similar 58 thousand b/d y/y, with Saudi Arabia (+0.12 mb/d) and Iraq (+67 thousand b/d) the key beneficiaries. Imports from UAE and Qatar fell by 0.13 mb/d and 65 thousand b/d respectively. Crude imports from the US were at 45 thousand b/d, the first since May 2016. Japan remained a net importer of products for the third consecutive month, driven by strong imports of kerosene at 87 thousand b/d. Total product inventories declined m/m by 0.3 mb with kerosene stocks falling to a seven-month low of 11.9 mb and LPG stocks close to a seven-year low of 19.9 mb. Crude inventories were down by 3.4 mb m/m.