Australian oil product demand fell from November 2018’s record high and y/y by 9 thousand b/d, to 1.02 mb/d in December 2018, the first decline in demand since December 2017. Weakness in demand was led by gasoline, demand for which fell y/y by 29 thousand b/d to 0.31 mb/d, despite falling prices at the pump. Record-high temperatures were in part to blame for the fall. Australia recorded its hottest December day on record, nudging 50°C in some places, and it was the warmest-ever December on average. Further declines came from jet, which fell y/y by 5 thousand b/d to 0.16 mb/d. Surging air-conditioning demand triggered power outages across Australia, resulting in reliance on diesel generation to beef up the transmission system. Total demand for the fuel rose y/y by 26 thousand b/d to 0.48 mb/d. Record-high temperatures are likely to have reduced demand in January too.
Refinery runs rose m/m by 29 thousand b/d to a three-month high of 0.54 mb/d in December 2018, rising y/y by 32 thousand b/d. The increase came despite weak product cracks, as Caltex reported a Q4 18 refining margin of $7.77 per barrel (-$4.4 per barrel y/y). Product imports grew y/y by 91 thousand b/d to 0.66 mb/d, led by a 96 thousand b/d y/y build in diesel imports to 0.39 mb/d. Product inventories grew m/m by 1.7 mb to a six-month high of 29.2 mb (+6.2 mb y/y), led by a 2.5 mb m/m build in diesel stocks, which rose to a record high of 11 mb. Despite the build in stocks, Australia’s inventories fell well short of the 90 day forward cover obligation set by the IEA, at just 53 days of forward cover. Total liquids production in Australia grew y/y by 80 thousand b/d to 0.32 mb/d, and inventories rose m/m by 0.3 mb to 10.9 mb (+0.6 mb y/y).