Australian oil demand rose y/y for the third consecutive month in January, by 6 thousand b/d to 0.9 mb/d, following an upward revision to December 2016 data that reversed what was previously a decline into growth. Oil demand could have grown further in January if not for adverse weather conditions (the hottest and wettest summer on record in several parts of Australia) and power outages. Growth in mining activities has pushed Australia’s manufacturing PMI higher since August 2016; it hit 59.3 in February, its highest since May 2002. Indeed, oil demand growth has been led by diesel since November 2016, with January diesel higher y/y by 8 thousand b/d, a trend we see continuing. Jet demand grew annually for the 17th consecutive month, by 1 thousand b/d, while fuel oil, bitumen and other products grew collectively by 6 thousand b/d. Gasoline and LPG demand, however, were lower y/y by 5 thousand b/d each.
Refinery runs rose by 9 thousand b/d y/y to 0.46 mb/d, but will fall below year-ago levels over February and March with BP’s 0.14 mb/d Kwinana refinery (Australia’s largest) down for planned maintenance. Crude imports increased by 37 thousand b/d y/y, but not enough to offset the y/y decline in crude production of 51 thousand b/d (condensate production was flat), causing crude inventories to draw m/m by 1.4 mb. Diesel inventories continued to recover from November 2016’s 29-month low, rising m/m by 0.82 mb as diesel imports were boosted by 31 thousand b/d y/y. Gasoline inventories, however, fell to a 26-month low, which may require elevated gasoline imports in the coming months especially with the Kwinana refinery down for maintenance. LPG exports rose marginally y/y to 35 thousand b/d.