Japanese oil demand fell again in May, by 50 thousand b/d y/y to 3.09 mb/d, the lowest on our records dating back to 1995. Demand for all products was down, except jet, consumption of which grew by an impressive 40 thousand b/d y/y to 1.28 mb/d, the highest since November 2008. Jet demand was likely boosted by higher inflows of tourists attracted by the weaker Japanese yen in Q2 18. Naphtha led the decline, falling by 39 thousand b/d y/y, on higher cracker maintenance (offline ethylene production capacity was higher y/y by 52 thousand tonnes in May) and continued preference for LPG among flexi-crackers. Demand for heating fuels declined y/y across the board—LPG (-15 thousand b/d), kerosene (-5 thousand b/d), fuel oil (-2 thousand b/d), and direct crude burn (-11 thousand b/d). Further nuclear restarts, namely Kyushu’s 0.89 GW Sendai Unit 1 (30 May) and 1.2 GW Genkai Unit 4 (15 June), which took the number of online reactors to six will help sustain declines in fuel oil and direct crude burn demand. Gasoline and diesel demand fell by 13 thousand b/d and 15 thousand b/d y/y respectively.
Refinery runs fell by 0.13 mb/d y/y to 2.83 mb/d, an 11-month low. Crude imports, however, grew by 0.20 mb/d y/y, led by higher imports from Iraq (+99 thousand b/d), Qatar (+88 thousand b/d) and Oman (+86 thousand b/d), offsetting lower imports from Russia (-76 thousand b/d) and the US (-47 thousand b/d). Iranian imports grew by 51 thousand b/d y/y, driven by the Iranian Heavy grade. Japan was a net product importer, taking 91 thousand b/d (+25 thousand b/d y/y) on lower exports of diesel (-35 thousand b/d y/y) and higher imports of naphtha (+27 thousand b/d y/y). Crude inventories rose m/m by 4.5 mb and product inventories were flat m/m.