Japanese oil demand fell once more in September, by 0.12 mb/d y/y to 3.12 mb/d. Naphtha demand was down by 41 thousand b/d y/y at 0.73 mb/d and LPG demand was 25 thousand b/d lower y/y at 0.31 mb/d, weighed down by heavy cracker maintenance in September (offline ethylene capacity was 66 Kt higher y/y). Fuel oil demand fell to 0.14 mb/d (-12 thousand b/d y/y) and is expected to continue to fall over the coming months due to likely nuclear plant restarts after the Fukushima disaster in 2011. The latest plant to restart was the Ikata 3 nuclear plant in late October, bringing the number of active reactors to eight out of 28. Jet demand fell m/m by 20 thousand b/d to 90 thousand b/d (-14 thousand b/d y/y) as increased typhoon activity in western Japan led to flooding at Osaka’s Kansai International Airport.
Refinery runs fell by 0.14 mb/d y/y to 3.04 mb/d in September, as Japanese refiners shut a combined 0.48 mb/d of refining capacity, an increase of 0.36 mb/d y/y, amid typhoon activity in the west and a 6.7 magnitude earthquake in the north of the country. Customs-cleared crude imports fell to 2.92 mb/d, down by 0.25 mb/d y/y. Imports of US crude increased markedly to 0.10 mb/d (+70 thousand b/d y/y), while imports of Iranian crude fell to 0.15 mb/d (-67 thousand b/d y/y) and we expect them to be fully suspended by end-October. Japan was a net products exporter of just 18 thousand b/d (-0.24 mb/d y/y), led by a 38 thousand y/y decrease in diesel exports, weighed down by a high base from Hurricane Harvey’s impact on US refineries in September 2017. Crude inventories fell m/m by 4.1 mb to 74.2 mb, and product inventories grew markedly m/m by 7.0 mb to 93.3 mb, led by rising kerosene (+2.6 mb) and LPG (+1.4 mb) stocks.