Australia’s oil product demand fell y/y for a second straight month in January, although only by 2 thousand b/d to just under 1.0 mb/d, the first sub-1 mb/d reading since October 2017. Gasoline demand fell y/y by 12 thousand b/d, despite average regional retail prices falling to their lowest since May 2018. Australia had its third-warmest summer on record in 2018, and January was the hottest month since records began in 1910, with the country’s mean temperature exceeding 30°C, which we expect has weighed on the number of kilometres driven. February was also hot, with temperatures exceeding the seasonal norm by 1.4°C. As for diesel, demand grew by 15 thousand b/d y/y amid a pick-up in factory activity, with the manufacturing PMI up m/m by 2.5 points to 52.5, marking a sharp recovery from its lows in December 2018. The improvement continued in February as the PMI hit 54. Jet demand rose y/y by 4 thousand b/d to 0.17 mb/d. The Australian Met Office expects a mild winter as El Niño conditions raise temperatures above normal, which could weigh on heating demand in Q2 19.
January refinery runs fell by 42 thousand b/d y/y to 0.49 mb/d, weighed down by lacklustre product cracks. Product imports fell by 93 thousand b/d y/y to 0.61 mb/d, led by a slump in diesel, down y/y by 76 thousand b/d at 0.31 mb/d. Nevertheless, product inventories grew m/m by 0.7 mb to 30 mb (+3.7 mb y/y), led by a 1.7 mb m/m rise in gasoline inventories to 7.3 mb, the highest since July 2018. Australia’s liquids output grew y/y by 31 thousand b/d to 0.31 mb/d, although this was entirely down to condensates, as crude production fell by 29 thousand b/d y/y to 0.12 mb/d, the lowest January reading on our records.