Japanese oil demand tumbled in June by 0.26 mb/d y/y to 2.85 mb/d, the lowest since at least 1995. Naphtha suffered its biggest y/y decline in years, falling by 0.18 mb/d to reach 0.56 mb/d, which was the lowest since November 2008. Naphtha’s decline was due to the highest monthly offline ethylene production capacity, 0.13 Mt, since at least 2015. Demand for heating fuels declined y/y across the board—LPG (-18 thousand b/d), kerosene (-12 thousand b/d), fuel oil (-40 thousand b/d), direct crude burn (-5 thousand b/d)—as nuclear restarts this year (taking the number of online reactors to six) backed out fossil fuels demand. But surging appetite for power due to July’s heatwave will likely cause fossil fuels demand to recover, as Kansai Electric was forced to restart two old fuel oil-fired power plants. Gasoline demand was flat y/y while diesel demand grew by 4 thousand b/d y/y as the 18 June Osaka earthquake appeared to have limited immediate impact but demand for both products will take a hit in July due to heavy flooding.
Refinery runs fell by 0.29 mb/d y/y to 2.52 mb/d, the lowest on our records since at least 1995. Crude imports fell even more, by 0.41 mb/d y/y to 2.40 mb/d, also the lowest since at least 1995. Imports from UAE (-0.19 mb/d), Qatar (-0.10 mb/d) and Russia (-0.17 mb/d) bore the brunt of the fall. Imports from Iran slipped m/m by 63 thousand b/d to 0.15 mb/d and are likely to fall further by October. Despite low runs, Japan was a net product exporter at 63 thousand b/d (+98 thousand b/d y/y) on lower imports of naphtha (-71 thousand b/d). Crude inventories fell m/m by 4.2 mb and product inventories fell by 3.6 mb led by gasoline (-1.6 mb). Refinery naphtha yield fell massively by 3.2 ppts y/y, but gasoline, jet and diesel yields grew.